Preamble

The House met at Eleven o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

CASE FOR A SOCIALIST BUDGET

Mr. Speaker: Before the first—

Mr. Kenneth Lewis: Mr. Kenneth Lewis (Rutland and Stamford) rose—

Mr. Speaker: Order. When Mr. Speaker is on his feet, hon. Members sit.
Before the first debate begins, may I point out that it is obvious that many hon. Members wish to express a variety of views during the debate. Brief speeches will help.

Mr. Kenneth Lewis: Mr. Speaker, may I raise a point of order with you, as we have the Leader of the House here, on which he might be able to help? There is a report in all the newspapers this morning that B.O.A.C. intends to take over B.U.A., which is a great private asset in, and one of our best, airlines. We think that this is a disastrous proposal, in which, apparently, the Government are involved. I wonder whether the President of the Board of Trade can make a statement.

Mr. Speaker: Order. That is not a point of order. An hon. Member who wishes to raise a matter that is not on the Order Paper has the method of trying to ask a Private Notice Question. No such attempt was made.

Mr. Kenneth Lewis: Further to that point of order. I am simply asking, as the Leader of the House is here, whether the President of the Board of Trade can make a statement. This matter is very urgent and is much more important than the business we are to discuss.

Mr. Speaker: Order. That is a matter of opinion, not of order.

11.6 a.m.

Mr. Stanley Orme: I beg to move,
That this House approves the general economic strategy outlined in successive economic reviews of the Trades Union Congress and upheld at the 1969 Labour Party conference at Brighton; and considers that these measures should now be incorporated in a Socialist Budget.
My colleagues and I who have tabled the Motion think that it is only right that the issue of budgetary policy should be discussed in the House prior to the Budget itself being presented. It is well known that Budget proposals are made by all interested bodies to the Chancellor of the Exchequer throughout the year. The Chancellor virtually goes into purdah from about January until the Budget date some time in April.
The House itself, which, in the final analysis, must approve the Budget proposals, should be able to discuss the construction of such a Budget and positive proposals which should be in it. My colleagues and I have therefore drafted a series of proposals which we shall put before the House this morning as suggestions which we hope that the Chancellor will implement in the forthcoming Budget.
I pay tribute to those of my parliamentary colleagues—those in the Tribune Group—who have assisted in drawing up these proposals. I make special mention of my hon. Friend the Member for Lewisham, West (Mr. Dickens), who, I hope, will be able to catch your eye a little later, Mr. Speaker, who chaired our discussions, and who, with his usual ability and integrity, has played a leading part in drafting these proposals.
Britain faces an improved economic situation. Although many of my colleagues and I have been critical of Government proposals in the past, we intend to start this morning from the situation as it is now and what we think should be done in the immediate future. We live in a society which is a mixed economy, which has a large measure of ownership of wealth in private hands, in which the commanding heights of the economy are still not democratically controlled, and in which we are faced consistently in our industrial society with mergers and with the intervention of the multi-national company.
These are broad aspects of our society, on which many of us have concrete proposals to make. Some of these proposals will come out in my remarks.
I emphasise at the outset that my hon. Friends and I, in March 1970, are concerned that Britain should once again resume her proper place as a nation of full employment, of growth, and of industrial expansion. We are a wealthy nation. A good deal of transformation and modernisation is going on in industry at present. There is a great capacity for Britain to expand much faster than she is doing. Therefore, we believe that the loss in production through unemployment, and of industrial capacity, in a rich nation such as ours should not be tolerated. For this reason, I want to make some basic proposals to the House, and, I hope, to the Chancellor.
The Opposition, naturally, will contribute to this debate and we on these benches will be interested to hear what they have to say. The economic debate which is going on in the country at large can affect the well-being of the people during the next 10 or 20 years, and we believe that a Labour Government can lay the basis for a just society. Bearing in mind the Labour Government's achievements, the advent of a Tory Government could lead to heavier indirect taxation falling hardest on ordinary people—I am thinking particularly of the V.A.T.—cuts in the social services, the abandonment of regional development which could lead to higher unemployment and—without wishing to refer to yesterday's debate—certainly bigger military spending.
This is the Selsdon Park man in post-imperial Britain. It is as outdated as the party opposite. Therefore, we turn to our Government and we say to them that in this post-imperial situation, when Britain's rôle as a world military Power is waning, an attempt must be made to develop our economy following the successful withdrawal from east of Suez. We welcome the fact that Her Majesty's Government are now spending more on education than on defence, though many of us would like to see further cuts in defence expenditure. We particularly welcome the increase in the provision for social and environmental services. These are real achievements in the teeth of Tory

opposition. But much more must be done.
We must guard against making the defence of the balance of payments surplus as rigid as we made the defence of the £ sterling. We must be much more open in our approach. With the falling off of overseas expenditure, we find that the balance of payments problem is very narrow and, with the removal of excessive expenditure overseas, it becomes much more manageable. I call in aid my right hon. Friend the Paymaster-General, who put the situation so succinctly recently when he said:
This great load of mainly short-term debt in no way represents the over-spending of the British people, nor is it evidence that they have enjoyed a standard of life beyond what they have earned. Over the last 15–20 years, after meeting our heavy and always growing difficulties in defence and aid commitments, we have erned a modest aggregate surplus on current account. The debts to the Central Bankers and the I.M.F. originated in a conversion of privately held short-term debt accrued over a period of years, to finance the balance of our export of capital.

Mr. James Dickens: It was a very good speech.

Mr. Orme: As my hon. Friend says, it was a very good speech. It was an expansionist approach to the current problem, and we welcome it. Indeed, we think that the Treasury should adopt that approach.
Looking at the question of Treasury orthodoxy, we find that following the July measures deflation has cost Britain over £6,500 million in lost output, in comparison with a possible 4 per cent. growth per annum, which is a modest aim when measured against the average attained by the O.E.C.D. countries of 5 per cent. With unemployment running above 600,000 at present, there is an excessive spare capacity in industry. Manufacturing investment is unsatisfactory, and we believe that this problem should be tackled immediately and positively.
We have a growth rate of barely 2 per cent. The aim should be to achieve a more rapid rate of economic expansion with a smaller balance of payments surplus. We therefore believe that the rate of growth should be between 5 per cent. and 6 per cent., instead of the estimated 2 per cent. which is in the economic forecast for the period up to 1972. One can call in aid other bodies which are not


necessarily associated with the Labour Party or with Socialist thinking, namely, the National Institute for Social and Economic Research, which has recommended in its recent review that there should be reflation to the extent of £650 million, which is equivalent to 4 per cent. growth. The National Institute believes that this capacity can be achieved, and I believe that that should be the basis of the Government's thinking and action. We are not advocating a consumer bonanza. We are advocating selective reflation on a positive scale in the areas where this is most necessary.
At least one effect of tabling this Motion has been that we have knocked ½ per cent. off Bank Rate. I hope that after this debate we may knock a little more off Bank Rate. I do not know whether the Chancellor is aware of this, but one aim which we have always stressed is to cheapen credit and stimulate investment. There is too much of a bonanza going on in the financial world arising out of high Bank Rate and we feel that the rate should be reduced still more.
There is a good deal of discussion in all sections of the community about the British economy, and I was interested to read what Mr. Paul Johnson said in today's New Statesman. I would not agree with the extreme criticisms that he makes of my right hon. Friends. Indeed, I thought at one time that he was referring to my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot). One passage in his article is worth quoting. He said that the ordinary people
know that they are paying injust interest rates or penal taxation on practically every purchase they make. They know that the bankers and money-men have never had it so good. They have just been told that the clearing banks make a monstrous profit of over £200 million a year. They have read all about the sordid scramble for nickel shares, and the huge fortunes made overnight on the stock exchanges.
Mr. Johnson goes on to say:
They do not expect Labour to turn a wicked world upside down and inaugurate a reign of perfect economic justice.
But they do expect fair treatment in this matter.
We advocate a reduction in the Bank Rate larger than has already been made. We advocate that we make available to local authorities 4 per cent. loan facilities

from the date of acquisition of the grant. We believe that private builders engaged on home construction should be included in the priority categories for bank lending and that the ceiling on local authority mortgage loans for house purchase should be raised from £100 million to £200 million in 1970–71.
This is aiming, in particular, at a section of the economy which really needs injection of impetus—that is the building industry. As my hon. Friend the Member for Liverpool, Walton (Mr. Haffer) has said on many occasions, a quarter of the unemployed at present are from the building industry. We should inject into the building industry real impetus because there is a crying need for homes. Anybody who denies that should go, as I went last Sunday morning, to my constituency, in Salford, and see there not hundreds but thousands of houses which will have to remain standing for the next 20 years, but which are not creditable to a modern industrial society such as ours.
We feel that the minimum hire-purchase deposit should be reduced to a standard 20 per cent. and the maximum repayment period extended to 30 months for all goods. This would assist, in particular the car industry. We believe that the school-building programme should be greatly extended and that we should concentrate on rebuilding slum schools and secondary modern schools and help reorganisation along comprehensive lines. The effect of these measures would be to increase consumer demand by about £250 million a year and public expenditure by just over £200 million.
These measures should be strengthened by a Budget which is designed to promote expansion and reform taxation. We believe that a rising level of public expenditure is essential if we are to create a better society—hence our opposition to a value-added tax, as has been proposed.
I turn to direct and indirect taxation. I shall make some proposals which will affect direct taxation for lower-paid workers in a moment, but the point I want to make—and which my hon. Friends want to emphasise—is that the principle of direct taxation still gives the fairest means of achieving taxation. We are not in favour of a massive switch to indirect taxation which would hit the


lowest paid who have not the facilities for choice, particularly if their wages do not match up to it. Therefore, I want to make crystal clear where we stand on that point.
The present tax system is very conservative and needs redrawing and redefining. Perhaps the Chancellor will agree that that is a fruitful possibility for the next Labour Government, which, we hope, will come in the not too distant future, since wage and salary earners, particularly those on salaries below £1,250 a year, are penalised by having to pay a far higher percentage of their income in both direct and indirect taxation than other forms of earners within our society.
This brings me to the question of wealth itself. I know that there is some doubt about the figures which are often produced about the ownership of wealth, but nobody has refuted that, as Professor J. E. Meade has estimated, the top 1 per cent. of the people of the country still own 42 per cent. of the wealth based in private property. In 1939, taxation on capital contributed more than 6 per cent. of the Exchequer revenue as against 3 per cent. today. There is a much higher income and a much higher growth in our economy, but those figures ought to be taken into account. So when we come to our tax proposals—which I hope my hon. Friend the Member for Lewisham, West will deal with in greater detail if he catches your eye, Mr. Speaker—we recommend that we exempt everyone earning less than £11 10s. a week from income tax as it is at the moment, with a phasing in for people in slightly higher incomes. This would take out about 4 million people now paying tax. We say, at the same time, that we ought to take 6d. off the 6s. rate, which would be of benefit, again, to the people in the lower income groups paying tax.
I am pleased that the Chancellor is here. We appreciate his presence. We feel that there is no justification for altering the standard rate at present. The people who have suffered under the measures which have been carried out and, incidentally, in the end created the wealth that this nation owns, ought to be the first to benefit from any relief of taxation now.
We feel that the purchase tax on essential goods—now at 13¾ per cent.—ought

to be abolished. Incidentally, we have costed these figures for the Chancellor's benefit and our taxation reductions of the 6d., and so on would mean, in effect, £130 million a year off the Exchequer. We say that purchase tax on clothing, furniture and household utensils should be abolished. We are not saying anything specifically this morning on selective employment tax, but we might under-write what the T.U.C. says on this point—that, in effect, any regressive effects that that tax has had on essentials could be removed by the abolition of purchase tax at this level. That would cost about £310 million, but it would reduce the Index of Retail Prices by about 1 per cent., which would mean a positive reduction in prices on the essentials with which people are so concerned.
We must launch a massive drive against poverty. There are five main groups in this category: the low-paid wage-earner with children, old people, the long-term unemployed, the disabled, and the fatherless family. We recognise that to do something for these people will call for a significant increase in social expenditure over the next decade, and this can be met from the community only by higher growth and taxation drawn from a broader and more equitable base.
A start should be made on child poverty, on which there has been a great deal of public discussion. I believe that the Child Poverty Action Group, which does an excellent job, has somewhat overstated the case, and the true position ought to be stated publicly. I welcome the letter which my right hon. Friend the Member for Sowerby (Mr. Houghton) had published in The Times yesterday, drawing attention to what has been done. There is no denying that more must be done, but exaggeration in these matters will not solve the problem, and I give credit to my right hon. Friend for what he said and the way in which he phrased his letter.
There ought to be an alteration in the tax allowances for children and an increase in the family allowance, up to 25s. or 30s. a week, and this could cost about £100 million or £120 million. In saying that, I appreciate the problem here and the criticisms which many hon. Members have to face regarding payments of this kind, but this is one of the major areas—not the only one, but an


important one—where poverty in our society must be tackled. I see it regularly among large families on poor incomes, and I know, as so many hon. Members do, how urgent it is that we should tackle the issue seriously and directly.
Now, a matter which touches the heartstrings of the Labour Party. The Chancellor of the Exchequer ought to take the opportunity in his Budget to abolish prescription charges. Net, this would cost about £12 million. It is not a question of arguing whether the charges ought to be set against expenditure on hospitals, work for the mentally handicapped or for mental health, or any other of the social services. They are all important, but this is a touchstone of Labour's sincerity in wishing to institute a completely free Health Service. We shall set ourselves back on that course only when we remove the indignity of the prescription charges, and I urge the Chancellor to do something about it. He knows the strength of feeling on the matter within our own party; he knows the decisions of the Labour Party conference and of the T.U.C. Something should be done this year.
We have been talking about the lower-paid, the lower income groups and the more unfortunate in our society. But there is a great deal of wealth in our society, too. I represent a constituency in the North-West, and I spent several weekends recently visiting people in all the areas which are my concern. No one who represents a constituency like mine can fail to notice, when he comes down to such centres as London, the amount of wealth and real opulence which exists. There is no denying it. In my view, in spite of the capital gains tax and other tax changes, not enough account is taken of wealth.
We advocate a wealth tax. This social inequality in our society should be tackled. There need be no insufferable burden for the Inland Revenue as a consequence. The cost of collection would not be high in relation to yield, only a tiny proportion of the population would be subject to the tax, and receipts per taxpayer would be considerable. The market value of equities and securities held is easily assessable, and rating valuation could be used as an interim

measure for land and buildings. A rate of 1 per cent. would yield £200 million a year.
Obviously, on an important issue like this, there are many peripheral questions which hon. Members will wish to raise. I ask my right hon. Friend the Chancellor to recognise that we have not set out to produce a complete and complex Budget, but we have taken the central significant points and costed them. Many other aspects of the Budget could call for attention, and, in passing, I may tell the House that, since it became publicly known that I should be initiating a discussion on the matter this morning, I have not been free from letters suggesting what could go in or what could come out, so much so that I begin to appreciate the pressure which my right hon. Friend's postbag must put upon him. I have heard about everything, from the removal of purchase tax on musical instruments to such serious questions as the exclusion of safety clothing for industrial workers, about which the A.E.F. group in the House of Commons wrote to me officially.
Some of my hon. Friends feel strongly about these other issues, not least the question of education and the need to develop its reorganisation on comprehensive lines. We suggest that public schools should no longer be regarded as charities. They receive a tax relief at present amounting to £6 million. We regard this as a necessary charge, and we recall that it was recommended by the Royal Commission which considered the matter. No doubt, Mr. Speaker, some of my hon. Friends will wish to pursue that question if they catch your eye.
The total cost of what we have suggested would be about £1,000 million now. Part of it would be met by a wealth tax, part by the increased tax revenue generated by more rapid expansion, and part by reducing the Budget surplus. We believe that implementation of our proposals would lead to a significant reduction in unemployment, and, having studied the issue, we would look forward also to a change in Government policy regarding the regions.
We recognise that the Government are in some difficulty here, and are endevouring to provide employment in the regions. These endeavours are essential, but we put it to the Chancellor that


some of the public money involved could be spent within the regions on creating publicly-owned industries run by the State in the interests of the taxpayer. On this count, I call in aid what was said in paragraph 25 of the T.U.C. Economic Review, 1970:
The General Council have been advocating for some time that there should be a more direct Government stake in industrial development, where private enterprise on its own is clearly unable to take all the necessary steps that are required to modernise its structure, technology or other factors affecting efficiency and productivity".
There is a case for the extension of public ownership, and in the regions this proposal could lead to positive advantage if taken up.
We recognise, also, that the Chancellor has a balance of payments problem, but my hon. Friends have some proposals to advance to show how, if difficulties arise, this could be dealt with, and I shall leave it to them to develop that aspect of the matter later in the debate.
I want to turn to the issue of prices and incomes, particularly incomes. We have consistently opposed a statutory incomes policy. A great deal of nonsense is talked about incomes. We do not believe that wage increases have been a major factor in causing inflation in recent years. There are many other factors, like import prices, higher indirect taxation and general domestic costs. Wage increases today, which are getting a great deal of publicity, we do not believe to be excessive. The income growth is in the region of 5½ per cent. to 6 per cent.
I agree with the analysis John Hughes made in Tribune only a couple of weeks ago, that incomes can be used as a stimulus to the economy, that today they are much more closely related to productivity, and that wage increases have never been given on the nod, but people have had to earn them and fight for them. Consequently, my right hon. Friend the Chancellor should not be too concerned about the increases, but should allow this development to take place. Certainly, within the public sector the Government will have to redress through their own means incomes which are unsatisfactory. I believe that a high-wage, high-productivity, high-growth economy is the basis of what our society wants.
There has been a great deal of debate about economic possibilities and econo-

mic development. The people today understand more about the economy than they have ever done. The Trade Union Movement has played a leading part in this, and I would like to give credit particularly to the successive T.U.C. economic reports, including the last, which I have not had time to quote in any detail but which makes positive proposals which are in the interests of our people and are basically what working people want. Many fundamental issues are raised, including the democratic control of industry and the question of the multi-national companies. There must be an extension of the public sector, which must be democratised, with workers' participation playing a part. The huge combines that are developing, amorphous developments with no heart, and in many cases it would appear no brain either, should be brought under public control.
These are some of the proposals my hon. Friends and I put before the House today as a contribution to the debate in which we are trying to engage. We say to my right hon. Friend, "Do not listen to the pessimists in the City or in the Treasury. Listen to the voice of the people that you and I represent." We believe that by channeling development towards them he will get the response from them which will help to create productivity and growth. We believe that Britain is on the threshold of great things and that we can become economically strong and economically independent. We are a great trading nation, great exporters and large importers of food and raw materials.
We believe that the Budget this year should be aimed at the type of development we have suggested, which would lay a basis for the people to see that the Labour Government are prepared to introduce measures which are sensible, constructive and in their interests.

11.45 a.m.

Sir Frederic Bennett: The hon. Member for Salford, West (Mr. Orme) and his hon. Friend the Member for Lewisham, West (Mr. Dickens), who has often discussed these matters with me in a most friendly and frank way, will not be surprised that there is very little in their views with which I find myself in agreement. But I respect the complete sincerity of their point of view,


as a number of hon. Members opposite well know.
I listened very carefully to a very fair exposition by the hon. Gentleman of what the Motion is all about. I have considerable sympathy with their point of view as Labour Members. I am treating the matter seriously, and not trying to sow discord between them and their Front Bench, but I recall that, certainly since the beginning of my political career, Labour M.P.s, candidates and workers throughout the country have been led by their political leaders to believe that when a Labour Government came to power policies of the kind outlined would be pursued.
Over the past 20 or 25 years what the hon. Gentleman has said today has not been exceptional within the Labour Party. It is what the hon. Gentleman's colleagues on the Front Bench have said when they were not in office in speeches over the past 20 years or so. Therefore, if hon. Members opposite are profoundly disappointed today I can understand their feelings, in that, having achieved a large majority in the House, they have not been able to see their chosen doctrines implemented.
What they have seen is a sort of mixture by successive Labour Chancellors in which just as little as needed to be done to keep the Labour Party reasonably quiet has been done in one Budget after another. But, otherwise, Ministers have had to live with the realities of the situation which they found when they came to office and which, in the mixed economy which we are discussing, they will always find, as any other party will when it comes to power. The realities of the situation do not necessarily fit in with any of the economic doctrines that any one of us may hold. The trouble is, as we know in business as well, that things do not happen as we would like them to happen. We have to live with the facts as they are when we take over a position of responsibility, and have to work within their ambit, although we can modify our approach to them.
I am sorry to have had to begin in that way, but I am trying to take the Motion as seriously as the hon. Gentleman did. Although I am arguing the opposite case, I do not think that I shall

be any happier with the Chancellor's Budget than some hon. Members opposite, though for wholly different reasons. There is an overwhelming case for a completely non-socialist Budget. I have a feeling that the Chancellor, who, obviously, will not give anything away today, will fall somewhere between satisfying me and his hon. Friend.
The hon. Gentleman and I may at least be able to agree on one or two basic premises. I agree that we have gained a very encouraging balance of payments surplus but at a very great cost in both social and economic terms—and almost in terms of social stability. The hon. Gentleman mentioned unemployment, and I agree that it is inexcusable that when one of our difficulties is to obtain sufficient production and productivity we should have an unprecedently high level of unemployment.
In some parts of the country, including the South-West, it is causing great hardship to large numbers of people. It is all the more inexcusable, social considerations apart, that we should be enduring this sort of thing when we are constantly being urged by the Government to increase production, productivity and our rate of growth.
We are also living in a period of unprecedentedly high taxation. The hon. Gentleman and I disagree on the question whether certain taxes are too high. We probably disagree about which taxes should be lowered and which raised. But I think that we agree that the present level of taxation across the board is too high. We are also having an unprecedentedly long and severe credit squeeze, which also affects productivity across the board, since one business after another is forced to hold back expansion, both in the public sector and the private sector, because money is so difficult to get and is extremely expensive when one gets it anyway.
The hon. Gentleman said that high interest rates were a banker's ramp. From my little day-to-day experience, I assure him that the last things bankers want are the present high interest rates and restrictions on their lending. If he thinks that bankers urge the Chancellor to keep the interest rates high and the credit squeeze on, he has a fallacious idea of their attitude. They are only too anxious to carry on with their professional role,


which is to lend money so that it can be put to a profitable use and that the financial structure of their customers will be strengthened.
The hon. Gentleman also attacked the profits from bank lending, but by the time corporation tax, income tax on distributed dividends and surtax have been met from the profits, this certainly cannot be called a banker's ramp. I would join the hon. Gentleman in writing a letter begging the Chancellor to start reducing Bank Rate more effectively as soon as possible. Of course, the timing is up to the Chancellor. We cannot decide at which moment Bank Rate can be lowered. I would also join in urging the Chancellor to relieve the severe credit squeeze. There is no difference between the hon. Gentleman and myself on that.
Nor did the hon. Gentleman mention that we are living in an era of seething labour unrest. None of us does that.

Mr. Orme: indicated dissent.

Sir F. Bennett: If I do not carry the hon. Gentleman with me, I must be alone on that. I could analyse the reasons for the unrest, but I do not think it is necessary. I content myself by saying that I at least regard the country as being in a state of near industrial turmoil in the relations between workers and management.

Mr. Russell Kerr: indicated dissent.

Sir F. Bennett: If the hon. Gentleman does not believe me, he should have flown in and out of London Airport during the last few days. That is just one example.
Having worked so hard and at such excessive cost, as some might say, to get a satisfactory balance of payments surplus, we are already seeing ahead of us the shadow of our advantages being eroded. Some of us reading the analyses of future financial trends know that, to some extent at least, the shot in the arm gained by devaluation in the price of export goods is already being eroded by a new wage-price spiral. The advantages are slowly being eaten away.
There are those in the Treasury who would admit, if they could, that the best chance we have to maintain a high balance of payments surplus is if other

countries manage their affairs less well than we do and have a higher rate of inflation than ours. In other words, these people hope—by God, they hope!—that industrial unrest will spread to Western Europe so that their prices will no longer be so competitive with ours, even though we are increasing our prices. We are depending on the lack of success by others to provide the best chance of maintaining our balance of payments surplus during the next year or two.
The hon. Gentleman will not be surprised to learn that I do not agree with his contrast between direct and indirect taxation. But I believe, from the economic and social points of view, that there is a great deal to be said for shifting the balance even further in favour of indirect taxation. With the exception of certain less well off groups, for which special protection should be provided, this country on the whole enjoys a high wage level.

Mrs. Anne Kerr: Would the hon. Gentleman be more explicit on this, because it concerns many of the lower-paid members of the public and many people on small fixed incomes?

Sir F. Bennett: I was going on to show why I favour indirect taxation. If I were to go into the question of what social steps I should take to protect certain groups, like those on small fixed incomes, I should be going rather wide of what I am trying to say. Obviously, questions of relief of taxation and social benefits are involved. I hope, however, that I will be allowed to go on with the theme of my speech, in which I am doing my best to answer the case of the hon. Member for Salford, West.
I favour indirect taxation, because if the country has a high earning capacity and standard of living—which we still have compared with most parts of the world—the human animal, on balance, likes the maximum freedom of choice in how he spends his money. He wants to keep as much as he can in order to exercise that choice. Whether hon. Members opposite like it or not, there is an increasing trend in the country towards keeping more money in one's pocket and deciding for oneself how one shall spend it.
Most of the opinion polls on the subject reveal that what I say is correct. It invariably follows that when people reach a certain level of prosperity they want to keep more of their money and the maximum freedom of choice is what they look for. They prefer indirect taxation, therefore, so that they can buy goods or not as they wish, or save as they wish.
The hon. Gentleman suggested that the balance of payments surplus was not the most vital consideration. I sometimes wonder whether, when we use terms such as "balance of payments surplus", we know what they really mean to this country. For example, unless we have such a surplus we can make no realistic investment in aid overseas. Nothing is more dishonest than what successive Governments have done in claiming the credit for aid overseas. They have not, in fact, been giving aid from this country. They have been borrowing it from other countries and then lending it out again.
I remember a very distinguished former Member of this House saying that no one had yet invented a method of investing a deficit. This, in effect, is what we have been trying to do over the years, by first borrowing abroad and then investing overseas, not always just in aid purely for the sake of aid, but in aid with a view to increasing the purchasing power of the recipient country to our own ultimate benefit, for it is eventually able in that way to buy our exports. We must have a balance of payments surplus for that purpose alone.
Secondly, only a limited proportion of our food is grown in this country and we have to import almost all our raw materials. We must, therefore, always have a cushion against changing terms in the balance of trade so that we can be sure that we are able literally to feed the people and to provide the raw materials which are essential to maintaining high employment. Therefore, having a balance of payments surplus is not a matter of dogma, but is something which it is essential permanently to maintain, at least as long as we are to be an investing and donor country in the underdeveloped world.

Mr. Alexander W. Lyon: Can the hon. Gentleman explain the situation

that for most of the time since the war America has been running a colossal deficit which, in effect, has been financing most of the world's trade?

Sir F. Bennett: The United States has been able to do this because in raw materials and food, the essentials of life, it is a self-sufficient country, whereas we are a trading nation and nothing but a trading nation. The other reason is that there has been more fat on the American bones than on ours, for a variety of historical reasons, and the Americans have therefore been able to do this for much longer.
But if the hon. Gentleman reads the financial Press, as I know he must, he will see that the Americans are getting increasingly worried, even with that amount of fat on their bones and although they are self-sufficient, and that they are having to draw in their horns, as is reflected in their attitude towards the Vietnam war and how much money they can afford to invest overseas.
The hon. Member for Salford, West spoke about selectively favourable interest rates. I assure him that this is a pipe-dream. I used to think that one could pick out a particularly worthy object and say that people should be allowed to borrow for it at low rates just because it was a particularly worthy object. But, in the first place, the Government have to borrow the money from the public, and unless they are prepared to offer competitive interest rates, savings will not increase sufficiently, as we have seen recently.
The Government cannot lend money at lower than the market rate, because if they did so, they would run into a serious domestic deficit, let alone an international deficit. Unless they are to run the risk of such a deficit, they must always lend money at approximately the rate at which they have been able to borrow it. However hard one juggles with figures, one will never get round the reality of the situation that basically money cannot be lent at less than the rate at which it was previously borrowed.
Nowadays, it is a nonsense to distinguish between earned and unearned income. It is no longer relevant to say that we are trying to deal with the great inherited wealth of the great estates. There are already extremely high


rates of estate duty to deal with that situation, anyway. But in equity it is entirely wrong to encourage a man earning £20 a week to save £1 a week for the benefit of the nation and to put his savings into gilt-edged securities, to save some of his money instead of spending it on consumer goods, but, when he eventually retires, taxing the income which he gets from that money at one rate and his other income at another rate, treating the income, fiscally-speaking, from his savings almost as a social disgrace. I cannot follow the moral argument which would justify that.
I hope that, if not in this Budget, certainly in the Budget afterwards, which I hope and trust will be introduced by another Government, we shall make a decisive move towards getting rid of what has always been a wholly unreal distinction,
The hon. Member was not fair to or appreciative of the part now played by what he described as the City and the bankers. It is invisible exports which have put the country right during the last few months, and the Chancellor at least would support me in this, certainly to judge from his tributes to the Invisible Exports Council. In the second half of this century it is becoming increasingly clear that Britain's days as simply a mass exporter of ordinary factory goods are rapidly fading.
We are rapidly moving into an era when only three choices will be available. One is to export the most highly specialised technical goods which the increased skills of the developed nations for some considerable time will permit only them to produce. This will be one way in which we shall see a change in the whole pattern of industry. But there are limits to that precisely because these goods are so sophisticated and highly developed that they are extremely expensive and very few places are able to buy them to the full extent that we should like.
Secondly, we shall move increasingly into selling capital goods, factory units capable of producing the goods which we are still producing to some extent, although not to the extent of some years ago. But there is a limit even to this, because we shall reach a time when those very capital goods will be producing in competition with some of our traditional exports. That, after all, in a sense is

why we are able to export these capital goods.
There is a third choice which I regard as being of the maximum benefit. It is that of invisible exports. Our skills in that respect remain—shipping, investment, insurance, or the handling of money through the City for international markets. That is where we have the longest-term and most successful rôle to play.
I give only two figures. Last year, 38 per cent. of our total exports arose from invisibles. This is not a chunk to be regarded as comparatively unimportant. During the last 150 years, there have been only eight when visible exports have accounted for a surplus. In all the others, invisibles have meant the difference between deficit and surplus.
Only a few years ago, hon. Members opposite were urging the Government to take over the vast private dollar holdings in this country and use them in our hour of need. The price of our New York official portfolio, sold several years ago for 400 million dollars by the Government, would now be worth many hundreds of millions more. Indeed, one reason why invisibles have been helping our balance of payments is precisely that, after great reflection and much hesitation, the Government did not appropriate dollar securities in private hands. They allowed them to go on increasing, with the result that today our dollar wealth has enormously increased over what it was 10 years ago and, incidentally, our dollar income is also that much better.
Hon. Members should not ignore the effect of incentives on the better-off classes as well as the lower paid. I am always amazed by the way in which the trade unions naturally say that their men will work not for the sake of the blue eyes of the boss, State or private, but because they want more money and a better way of life. The same is true all the way up the scale.
In the last few years, a number of skilled people have emigrated. I am not saying that this is because of the Socialists and that everybody stays at home when there is not a Socialist Government. There has always been a tendency for skilled people to emigrate. They go away not because they do not like England, but primarily because they


believe that they can find a better way of life elsewhere. The immigrants from the Commonwealth come here not because they particularly love England, but because they think that they will find a better way of life here. This is perfectly natural. When a skilled man goes to America, it is because he thinks that he can get a better job there. He goes not to join the Republican Party or the Democrat Party, but to earn a higher screw and have a better way of life.
Hon. Members opposite should beware of penal taxation against the better off because, although in the last resort the Chancellor of the Exchequer can do something, although not much, to control the movement of capital, he cannot do anything to control the movement of brains and people. If hon. Members opposite get their way and have a truly Socialist Budget, in a few years they will find that the country is suffering greatly in the result.

12.10 p.m.

Mr. James Dickens: The hon. Member for Torquay (Sir F. Bennett) has made a characteristically stimulating intervention, from his point of view. Let me make this point to him and the party opposite at the outset: one of the great tragedies when we look at the degree of invisible exports and their importance to the British economy is that we have over these last four years lost £6,500 million in terms of national output in this country, lost in part at least to sustain the nonsense that the City of London should any longer be a major supplier of capital to other advanced industrial countries abroad.
The second point I would make is that part of the reason for stagnation, certainly until devaluation in November 1967, was the Government's desire to maintain a fixed sterling parity, to maintain sterling as a great, viable reserve currency. The hon. Member will know, as I know, and as most people in the City will concede, that all the earnings from invisible exports, to which he has rightly drawn attention, could have been earned irrespective of whether the £ sterling was used as an international reserve currency. It would not have made any difference to the rôle of the City in terms of its insurance and shipping earn-

ings. The gains that the country has made from invisible exports in recent years have been gains bought at prodigiously heavy cost.
I turn now to say a few words about the Motion moved by my hon. Friend the Member for Salford, West (Mr. Orme), one with which my own Motion happily coincides. My hon. Friend was kind enough to pay me a somewhat exaggerated compliment. I want to say of him, and I am sure that this view is held by a great many hon. Members on both sides of the House, that he has been a consistent, staunch, and doughty supporter of the workers' cause in the House of Commons. He is a very fine trade union Member of Parliament. During his remarks he was able to set the background for the sort of debate to which I hope this House will become increasingly accustomed. He rightly said that the Chancellor of the Exchequer is given plenty of advice, some of it bad advice, from sources outside this House. It seems remarkable that we Members of Parliament, who have to take the responsibility at micro-economic level in the constituencies for decisions arrived at at macro-economic level in Whitehall, should not have a debate before the Budget to express what we think the Budget might contain.
I was not in the Chamber when the disturbance took place at a late hour last night, but I note with some concern the sort of Press that the House of Commons has received in leading national newspapers this morning. The standing of the House in this country at present is not such that the British people will for long tolerate that sort of conduct here. I do not believe that the House of Commons is at its best on an occasion of the type that apparently took place last night—

Mr. Speaker: Order. We had enough of that last night. We must come back to Socialist budgets.

Mr. Dickens: I am just about to make the point that the House in the course of this debate has the opportunity to redeem itself. My hon. Friend the Member for Salford, West made it clear that this is in no sense an alternative Budget. That is beyond our powers. It is beyond the powers of members of a predominantly amateur part-time


assembly. In later years it may be possible for members of a full-time professional House of Commons to advance Budget proposals which can be argued out on a level of full equality with the Government machine. But that time is a long way away.
My hon. Friend discussed a wide range of proposals dealing with the economy and tax reform, and I will seek to add some points of detail to them.
Let me turn first to the general economic background. I begin by reiterating some of the facts which have led to the present situation in the British economy. My hon. Friend mentioned the quite striking speech made by the Paymaster-General, in which he drew attention to some of the real causes underlying the present balance of payments deficit. I merely make the point that the Paymaster-General is no longer at the Treasury. While I am delighted to see the Chancellor with us again this morning, it is a very great pity that the sole public exponent of expansionist views was moved from such a key position in the Government.
The Paymaster General was simply saying what the facts bear out, and that is that in the four years from 1965–68 inclusive the cumulative deficit on the balance of payments on current and long-term capital account at £1,124 million was more than offset by the net foreign exchange costs of overseas military expenditure, which came to £1,082 million, plus the net private outflow of capital, most of it to advanced industrial countries abroad, which came to £403 million net, if we exclude borrowings in the Euro-currency markets and the re-investment of locally-earned profits abroad. These figures show quite clearly that this country could have had an average surplus of something like £100 million a year in each of these four years.
It shows that the main reason for the balance of payments difficulties that we have had to face has been the massive external obligations, unique among comparable countries, that we have had to bear. I mentioned earlier the enormous cost of achieving the present balance of payments surplus. I estimate that figure at £6,500 million since deflation seriously began in July, 1966. The signs of this are everywhere, or everywhere evident.

Over 600,000 people are out of work in this country for the fourth successive winter, 59 per cent. of them adult male workers who have been out of work for longer than eight weeks. The rate of capital investment in private manufacturing industry is currently no higher as a proportion of national income than it was a decade ago. There is the gradual slowing up of the rate of increase in public expenditure. To continue with the present Treasury formula of trying to relate the rate of public spending to the national income can only lead to a social explosion in the 1970s.
For example, who would tolerate a situation in which education advances between 1972 and 1974 at an annual average rate of only 2 per cent. per annum? It is a nonsense, and must be seen to be a nonsense. Moreover, it is the complete negation of Socialism. To argue that public expenditure should advance at only the same rate as the national income means that we accept that the present balance between private consumption and public expenditure is satisfactory and unchangeable, and this I find totally unacceptable. Moreover, that is precisely what the Conservatives were able to do between 1951 and 1964—and look at the situation in the social services which we inherited when we took office in October, 1964!
My hon. Friend the Member for Salford, West made some specific proposals for reflating the economy this spring. They were rightly concentrated on the construction industry, for the construction industry is perhaps the best example of the Keynesian accelerator-multiplier concept in that, with a given rate of increased expenditure, there is a markedly higher rate of production and consumption.
My hon. Friend's proposals could lead to a rapid, marked increase in housing construction and in the construction industries generally in the nine months which remain of this year and certainly throughout 1971 and subsequently. He drew attention to the degree of spare capacity in industry. Not only is there a large number of people out of work, but in certain key industries there is a high level of spare capacity. For example, the motor car industry is working to 80 per cent. at most of capacity.
My hon. Friends have welcomed the reduction in Bank Rate announced yesterday—the first gleam of sunshine in a bleak, deflationary winter. I hope that my right hon. Friend the Chancellor will be encouraged to take further steps to reduce it. I see no reason why it should be used, as I suspect it is being currently used, to attract a large inflow of hot money short-term capital which The Guardian said recently totalled £250 million in February. We know what happens to that hot money if the country hits a balance of payments crisis, for whatever reason. It flows out as quickly as it has come in. The cost of attracting this money to London is an extremely heavy burden for the British economy to bear in terms of a high rate of interest.
I suspect, too—and I leave this thought with the Chancellor of the Exchequer—that another reason for keeping the present high level of Bank Rate is to accumulate a massive balance of payments surplus, not merely to repay the short-term debt which this country has incurred since 1964, but to build up in the bank, as it were, a surplus which will be required to offset the economic disadvantages of entering the European Economic Community.
We estimate that the cost of carrying out my hon. Friend's reflationary proposals—three of them in the construction industry and another dealing with the increased requirement for building and education, particularly for primary schools in slum areas and secondary schools to accelerate the reorganisation of secondary education on comprehensive lines—amounts to £200 million per annum in terms of private consumption and a further £250 million per annum in terms of increased public expenditure. That would be the total cost of improving the local authority borrowing facilities, of giving private builders higher priority for bank lending, of raising the ceiling on local authority mortgage loans, and of lowering minimum hire-purchase deposits to an estimated 20 per cent. all round, with a maximum repayment period of 30 months for all goods.
To take such a step as the last one, is not to return to the sort of wild hire-purchase boom that we had in the 1950s and 1960s. For example, In August, 1954, the Conservative Government lifted all hire-purchase controls on deposits and

on the length of repayment. They had to reintroduce some of them in February, 1955; but they went much further than we recommend today. In November, 1958, they again removed all hire-purchase controls in good time for the 1959 election, but they had speedily to reintroduce some for them in 1960. In June, 1962, they cut all hire-purchase deposits to a flat rate of 10 per cent. all round with a repayment period of 36 months.
What we are saying is very much more modest; namely, that if the level of unemployment is to be reduced and the level of investment increased, we must take certain steps to reflate private consumption to a limited, planned degree.
I turn now to the question of taxation and tax reforms. My right hon. Friend the Chancellor is being inundated with advice on his Budget. I hope that he will find my proposals not entirely unwelcome. I begin by discussing the burden of direct taxation. Before the war, the personal allowance for a single person was £100 per annum and for a married couple £180. Average weekly earnings in 1938 were £3 10s. In 1970 the personal allowance for a single person is £255 per annum and for a married couple £375. Average weekly earnings are now just under £25 a week. Therefore, while average weekly earnings have increased sevenfold over the past 32 years, personal allowances for income tax purposes have only doubled.
It would be prodigiously expensive to try to lessen the burden of direct taxation by simply having an across-the-board personal allowance. For example, if we were to raise the personal allowance for a single person from £255 to £300 and for a married couple from £375 to £450, the cost across the board would be £550 million, and the surtax payer would benefit most from it. Other proposals designed to help people at the lower end of the scale must, therefore, be considered.
The T.U.C. has put forward a most interesting proposal designed to increase the earned income relief from two-ninths of earned income to a formula of "£300 or two-ninths of earned income, whichever is the greater". This proposal has certain merits, but I suspect that it would come up against the familiar stumbling block in the Inland Revenue which seems to be such a barrier to social


advance, namely, that the burden of work on the Inland Revenue is such that it simply could not cope with all the additional complications which a proposal of this kind would inevitably entail.
I do not think that a radical social reforming Government can accept for a moment the proposition that social advance in Britain should be hindered or held back because the tax collection system is not sufficiently geared to meet the needs of our time. But I recognise that this is a serious argument which must be met and overcome. Therefore, before we proceed with tax reforms of a wide-ranging nature, which I think are long overdue, particularly in the taxation of capital and inherited wealth, the first thing that we must do is to take some of the present load off the Inland Revenue.
An overriding characteristic of the present situation is that the Inland Revenue is chasing comparatively large numbers of people for relatively small amounts of money. I therefore suggest that the first thing to do is to take as many people as possible completely out of paying income tax at the lowest cost to the Exchequer.
My suggestion is that we raise the tax threshold to a flat £600 a year—roughly half current average industrial weekly earnings—and that we have a phasing-out between £600 and £700 per annum so that someone with an income of say, £625 a year is no worse off than someone whose income is, say, £575 a year. I estimate that the cost of this in the current fiscal year would be about £150 million. This would be the cost of taking at least 4½ million people out of paying tax altogether, including many of the old people on pensions or very low paid persons. Additionally, it would cut heavily the taxation on a further 1½ million people. These are the advantages of the proposal.
The disadvantages are twofold. First, it must be clearly understood that I am not arguing a case for raising the personal allowance. Personal allowances would remain exactly as they are. Consequently, people a little above that level at £700, £800 or £900 a year would not benefit from this reform. Our suggestion, however, is that we concentrate this particular tax relief on the poorest people, those whose weekly income from all sources is £11 10s. or less, and that we

cut income tax on people whose income ranges between £11 10s. and £13 a week.
The second disadvantage of this proposal is that it would not in any way remove any of the burden from lower-paid workers with large families as they pay little or no income tax. It would, however, secure maximum relief for a great number of people at comparatively low cost to the Exchequer.
What I have tried to answer is the argument that the Inland Revenue cannot cope with any more work because it is over-burdened. This suggestion at least lifts part of that burden from the Revenue.
I turn, secondly, to income tax. We know that the party opposite has said publicly—the right hon. Member for Enfield, West (Mr. Iain Macleod) has said it publicly—that it wants to see a cut in the standard rate of income tax from 8s. 3d. to 7s. 9d. in the £. This would be a grossly inequitable tax change. Let me give three examples of how this would affect people at different levels of income. Take, for example, a single man earning £20 a week with no family obligations and, thus, no family allowances. He would receive precisely 4s. 8d. a week from a cut in standard rate of 6d. in the £. Take an industrial worker, married and with two young children, with a £3,000 mortgage on a house in London, perhaps in West Lewisham, earning with overtime, say, £25 a week. His net tax bill would fall by precisely 1s. a week.
Take as another example the chairman and managing director of a well-known private international corporation with its headquarters in London who is reported to be earning £70,218 per annum. A cut in standard rate of 6d. in the £ would benefit him to the tune of £34 a week. It can, therefore, be seen that a cut in the standard rate of income tax would help the wealthiest most of all and the lowest paid hardly at all.
I believe, however, that there is a strong case for making a tax reduction which would ensure that people on average weekly earnings of around £25 a week got the maximum benefit. Hence the proposal for reducing the lower rate of tax from 6s. in the £ to 5s. 6d. in the £, because this would give everyone a maximum benefit of £6 10s. a


year. It would not be a sweeping across-the-board cut such as a cut in the standard rate would be, because one pays 6s. in the £ on only the first £260 of earned income. The cost of this proposal would be £130 million a year.
My third proposal concerns indirect taxation. Here I take up some of the points made by the hon. Member for Torquay. Indirect taxation need not in all cases necessarily be socially regressive. I think that through the system of purchase tax we have in this country a system of indirect taxation which is about as socially progressive as we have so far been able to devise in Western Europe.
Thus, for example, I am not at all in favour of cutting the Customs and Excise duty on tobacco, for example, or on wines or spirits or, for that matter, on fuel oil. Nor am I prepared to cut purchase tax on expensive jewellery or fur coats.
But the burden of indirect taxation is certainly regressive when it hits the families, particularly of working people, on household necessities like clothing, furniture and a wide range of household utensils. That is why we say that this burden of indirect taxation—and indirect taxation currently accounts for 42 per cent. of all tax revenue in Britain—should be reduced by removing from purchase tax the lowest band-13¾ per cent.—in its entirety. The cost of this would be £310 million, and it would have some beneficial effects on the index of retail prices, which would fall by about perhaps up to 1 per cent.
I come now to the question of social policy. My hon. Friend the Member for Salford, West drew attention to the fact that there are a number of areas of poverty in our society. My hon. Friend was right to be critical of some of the remarks made recently by the Child Poverty Action Group, but I do not think that anyone on this side of the House would deny the absolute sincerity and integrity of that group in advancing its case.
What we have to do as a party and as a Government is to devise for the 1970s a coherent social strategy which aims at the total and complete abolition of poverty over the next decade. This was one of the main principles of the

early pioneers in the Socialist Movement at the turn of the century. We have achieved a great deal since then, but in terms of dealing with child poverty, old-age pensioners, the long-term unemployed, the chronically mentally or physically handicapped or the one-parent families, we clearly have a long way to go. My view is that this poverty is at its most acute at present among low-paid wage-earners with families, and so I suggest we start the process here.
I consider that the way to tackle this problem is to recognise that the present arrangement of child tax allowances plus a cash payment of family allowances does not help effectively the people in this category. For example, the child tax allowance obviously means a great deal to a person paying surtax who has a child aged between 16 and 19 at school and who collects a tax relief of £165 per annum on, perhaps, 12s. in the £ or so. It does not mean a thing to a person earning between £700 and £800 a year.
Therefore, what we have to do first is, for the second and subsequent children, to consolidate the £700 million, which is the present cost to the Exchequer of child tax allowances, into a cash payment of family allowance That was what the Swedish Social Democrat Government did in 1948. This would mean that we could at once raise the present family allowance for the second child and subsequent children to 27s. for each child tax free.
It is most important that any increase in the cash payments of family allowances should be made tax free because otherwise we simply push a great number of the lower-paid people back into paying income tax. If we are to ensure that the cash payment of family allowances meets in every case the present circumstances of parents paying at the standard rate—that is to say, that no one paying the standard rate of tax is worse off as a consequence of these changes it means raising the level of family allowances not just to 27s. a week but to 34s. a week, tax free, and this would cost the Exchequer an additional £120 million.
I turn, finally, to the taxation of the rich. We in Britain today still have one of the most unequal societies not only in Western Europe, but in


the advanced world. I will give a few figures. The most frequently quoted figure is the one mentioned by my hon. Friend earlier. The top 1 per cent. in Britain in 1960 owned then 42 per cent. of all personal property. I am pretty certain that that figure has not diminished over the past decade. All the signs are that the degree of capital accumulation in the private sector, of private wealth, has in fact increased.
Now what are we proposing here? We are proposing that this country should try to emulate Finland, Sweden, Norway, Belgium, Holland, West Germany, and virtually every other country in Western Europe, by bringing in a wealth tax. We suggest that we begin with the self-assessment of personal fortunes of £50,000 and above. Great things flow from small beginnings. The right hon. Gentleman the Member for Enfield, West talked at the Tory Party conference at Brighton of self-assessed taxation and said it offered the British people "new and exciting opportunities." Very well, let us start to take advantage of these new opportunities, in an admittedly experimental way, by putting this tax on wealth.
What are its benefits? First, the tax yield would be high in relation to the number of taxpayers. The Inland Revenue would not be overwhelmed, because the tax would fall on a very small number of people, and the yield from the tax would, thus, be very high. Moreover, as my hon. Friend mentioned earlier, there are plenty of guidelines available. The value of securities and investment is easily assessable. If one owns land, there are the rating valuations which could be used as an interim measure for this purpose. The value of personal possessions of, say, expensive antique furniture and jewellery can be assessed by reference to insurance policies. The rich are rarely under-insured for their personal property.
A tax of 1 per cent. on personal fortunes of £50,000 and above would bring in £200 million a year, a limited, modest advance which would bring us into line with virtually every other advanced country in Western Europe.
I conclude this part of my remarks about the wealthy by saying that we note that in America the top 1 per

cent. of the population own only 24 per cent. of personal property, against 42 per cent. in Britain, and I draw, with great solemnity, the attention of the House to the fact that the recent report of the National Commission on the causes of violence in America has specifically named social inequality as a major cause of violence in that country. The warning for us is clear. In an age of mass media communications, in an age of affluence, people simply are not willing to tolerate this degree of social inequality for much longer. So I am suggesting that we make a modest start to redress this balance now.
The net cost of our proposals, with the increase in public expenditure, and with the various tax reductions that I have described this morning, less the additional revenue raised from self-assessed wealth tax, would cost the Exchequer £800 million a year. Is this figure extravagant? I draw the attention of the House to the fact, firstly, that the National Institute, in its quarterly review published this week, has called for a reflation of £650 million to get us back on the target set out in the document "The Task Ahead" published by the Government in February, 1969. That postulated only a rate of economic growth of 3¼ per cent. between now and 1972. The Trades Union Congress estimates that to attain a rate of economic growth of between 4 per cent. and 5 per cent. it would be necessary to reflate the economy in Britain by £1,000 million. I am more ambitious. I believe we should aim at a rate of economic growth of 5 per cent., the average attained by the O.E.C.D. countries in the recent past. This would cost the Exchequer £800 million, and by certain limited steps, increase private consumption by £200 million. These are specific, positive, clear-cut proposals.
I conclude by simply mentioning the headings of what could be done to tackle any consequential problems caused by reflation to the present balance of payments. I am not going to discuss them in detail. They are, firstly, the fact that we can draw, if we wish to draw, upon our overseas portfolio investment which totalled, as the hon. Member for Torquay reminded us, £5,800 million at the end of 1968. I am suggesting that if the country does want to repay short-term debt quickly this is a much better way


of repaying it than by building up a balance of payments surplus at heavy cost to the economy at home, where the seed corn does lie.
Secondly, we would cut further the outflow of private capital to advanced countries within the sterling area, and, in particular, speculative capital going to Australia.
Thirdly, we would keep a very close watch on the import position, certainly retaining the import deposits scheme, and, if need be, bringing in a system of selective import controls to meet the upsurge of imports which reflation would inevitably create.
Finally, we would, of course, take further steps to reduce military expenditure at home and abroad.
This morning I have spoken for some length of time and I am sorry for that, but I have tried to elaborate a succession of serious proposals on complicated matters, which, taken together, could not only give this country a much higher rate of economic expansion, reduce unemployment to below 400,000, stimulate the economy and thus provide a much higher degree of public expenditure in future, but set Britain out, in the 1970's and the remainder of the century, on the path not only of economic advance but of social justice, too.

12.48 p.m.

Sir Brandon Rhys Williams: I think that the whole House is indebted to the hon. Member for Salford, West (Mr. Orme) for the choice of this subject at such a very opportune moment. Already the House has heard some extremely interesting contributions with much of which, I think, we are likely to be in agreement, although there have been also some rather partisan remarks.
If we are to consider the case for a Socialist Budget we ought really to decide, first, what we mean by "Socialist". Those of us who have followed the thinking of people like William Morris have found the word "Socialist" a very attractive one. It connotes a sense of brotherhood in knitting the whole of society together; but I think that a number of hon. Gentlemen of the Socialist persuasion have betrayed the original ideas of Socialism and have

brought in class war elements which really have no place there.
If we consider the cash relationship between the individual and the State we shall not make a satisfactory Budget if we try to use it as a divisive rather than as an associative weapon.
What do we mean by "Budget"? The wretched citizen is already like a sheep worried by a number of wolves, with the different Budgets which are taking away his resources. I am thinking here of local authority budgets as well as the national insurance budget. The two Budgets which the Chancellor of the Exchequer introduces, although they are introduced on the same day, should be seen as separate Budgets. There is the Chancellor's acquisitive or arrogatory Budget, in which he obtains enough money for the Government's purposes, and there is the Chancellor's redistributive Budget, which takes away cash from people and then hands it back to them, perhaps simultaneously, either as cash or in the form of personal services.
The T.U.C. Economic Review for 1969, the Child Poverty Action Group and all who are interested in the social services have been drawing urgent attention to the problem of the low income family, and this is the subject on which I wish to speak this morning.
National insurance, for historical reasons, tends to deal with people who are not in employment and who have no income because they are in retirement, unemployed or sick. National insurance fails to deal with those who are in work but do not have enough money. Various methods have been tried of assisting men on low incomes, particularly at the stage in their careers when they have the largest responsibilities, that is to say, when they are raising their families. We have free school meals, welfare milk, rent rebates, rate rebates and, much more important, the Health Service, public education, council housing, family allowances and the various negative allowances in the tax system. But when all those have been taken account of, the problem of the low-income family still remains on our consciences.
It is appropriate at this stage for me to talk about the campaign for a national minimum wage. The paper on this subject, "A National Minimum Wage", published last year by the Department of


Employment and Productivity, has not received sufficient attention. It is an admirable survey of the subject, which contains some exceptionally interesting and detailed tables, and I feel obliged to accept its summing up. May I quote two lines from paragraph 170 of that summing up which are relevant.
The national minimum is likely to be a less efficient means of relieving poverty than selective social benefits related to individual needs.
Since the Motion refers specifically to economic reviews of the T.U.C., it will not be inapposite for me to quote from sections 106 and 107 of the 1969 Review. In section 106 the authors make three recommendations, one of which is as follows:
The trade union Movement is looking to the Government for positive action and support in promoting social equity (particularly in improving the relative position of low-paid workers)…
The following section expands that, and I hope I may be permitted to read the whole of this, as it is relevant to our discussions:
The General Council have put to the Government, and intend to pursue further with the appropriate Ministers, ways of improving social equity. First is the need for changes in taxation. As was pointed out in the 1968 Review, the British tax system is not in practice highly progressive and indeed if anything is regressive at the lower levels of income. An advance in the living standards of lower-paid workers can be secured in a less cost-inflationary way by fiscal redistribution than by laying all the emphasis on increments to the wages bill. This redistribution should not be confined to the lowest levels of household-earned income but should extend to the average levels of working class income in order to correct the increased burden of tax imposed in recent years.
I cannot say that I entirely support the General Council's thinking there.
Second, the General Council have already made representations to the Government about the need for a further substantial improvement in family allowances. Taking as an example a married man with three children earning £12 a week, his present net income (including family allowance and National Insurance contributions) amounts to £12 18s. a week. This net income could be raised to about £15 a week by increasing the family allowance (tax free) to 30s. a week for each child including the first, and abolishing the child income tax allowance. This proposal is being explored by the General Council.
I do not know how far those explorations have gone, but we have seen recently in the serious Press a great deal

more consideration of family allowances, or—perhaps more adventurously—negative income tax or positive tax credit systems, as ways of dealing with the problem of the low-income family. About a month ago a centre page article in The Times was very sympathetic on this subject. The Financial Times also had a centre page article on the subject. The front page of the New Statesman and the front page of New Society were also dedicated to this subject. In The Guardian, which is normally very well informed on the matter, there appears today the prediction that we are able to look forward this year to a sophisticated Budget which will be particularly concerned with this problem. I certainly hope that that is correct.
On the other hand, I am aware that the old hands, particularly on the Front Benches, tend to reject these new-fangled ideas of negative income tax or positive tax credits. I suppose that after years in the House they are impressed by the inevitability of gradualness, or, possibly, are just opposed to any novelty on principle. But the transition from "old hand" to "old hat" is a very short one. I feel that Front Bench opposition to new thinking on this subject will prove to be tragically misplaced and will soon be found to be out of touch with the mood of the country and of the people who seriously study tax reform and the social services.
In the computer age we must think imaginatively. We have to study the essentials of the cash relationship between the individual and State and not concern ourselves with the details only. Above all, we must not confine ourselves to the traditional way of doing things as, unfortunately, the Government are doing in the introduction of computers into the national insurance system and into the reform of income tax.
In Committee, the National Superannuation Bill—I might almost call it the National Superannuation Budget—is moving towards amalgamating contributions to national insurance and income tax. National insurance contributions will be put on an income-related basis and will be collected through the same mechanism as income tax, namely, the pay-as-you-earn system. Nevertheless, the Bill fails to amalgamate the paying-out side of the welfare state, which remains in its present chaotic condition.


The National Superannuation Bill, therefore, falls short of helping the low-income family and remains limited by pre-war concepts of the rôle of national insurance. So this great Measure, which was hailed as being better than Beveridge, is in fact, merely a tinkering with figures rather than a means of introducing fresh ideas.
The computer age will increasingly urgently demand the complete amalgamation of the national insurance system, family allowances and income tax. National insurance deals primarily with those who are out of work for one reason or another; income tax deals almost exclusively with those who are in work; family allowances, in the middle, deal with people who are either in work or out of work. They deal with all categories of families.
Last year, I published an article in which I examined the case for increasing family allowances to 25s. and paying them to the first child. With the generous assistance of the Board of Inland Revenue, I produced some tables which, I hope, will convince students of this subject that this is a perfectly feasible move to make. The Child Poverty Action Group and others are recommending a much higher increase in family allowances. They, I understand, are bidding for 35s. That is perhaps a rather higher figure than one can hope for all in one Budget.
I think that it is worth while considering why family allowances are assumed to be unpopular. This is a subject on which I have spoken frequently to audiences of all kinds. I have never encountered the hostility to family allowances that is said to exist. I encounter people who, perhaps because they brought up their families without the benefit of family allowances, feel that these allowances are wasted. One can find examples of mothers who do not manage their affairs well and do not do as much with the family allowance as public opinion thinks they should.
But to use those relatively few mothers as an argument for doing away with the family allowance altogether, is like using the argument that we should do away with public education altogether

because there will always be some children who waste their time at school. When I look at the condition of our children and compare it with what I remember child poverty was like in South Wales before the war, I am convinced that mothers are using the money from their family allowances to very good effect.
There is opposition to these allowances by people who feel that any increase in this country's population would be untoward. I feel that their position is not based on statistical evidence. I do not believe there is any family allowance system in Calcutta, or Mexico, or in any of the countries where there are the highest birth rates. If anything, it is possible to adduce facts to show that as family living standards rise, so the fertility rate declines. Even if there were to be some increase in the younger population of this country, would that not simply be putting us in a position to provide the man and woman power for our essential public services?
Another argument against family allowances is that they enable a man to "swing it" on the social services. We all know that there are scroungers. In any society, there will be people who will make use of social services to give themselves an easy ride. I suppose there are even people who feel that if they increase the size of their family then, if they fall out of work for any reason, be it good or bad, the benefits will enable them to continue to live at more or less the standard of living to which they are accustomed.
There is evidence of this problem, but it is not considerable. It must not be denied, but it must not be exaggerated. We shall solve it by looking at the relationship between incentives to work and incentives to remain idle in cash terms; and in psychological terms by examining the whole basis of selectivity in the social services with particular reference to sickness benefits.
I should like to make a specific recommendation to the Chancellor of the Exchequer in preparing his Budget this year. In making it, I differ from the hon. Member for Lewisham, West (Mr. Dickens) in his idea that what is required is a large increase in the personal allowances in our tax system. He suggested, if I quote him correctly, that the tax


threshold should be raised, so that a flat £600 a year should be made free of tax. I believe that this will not solve the problem or will not solve more than part of it. The people about whom we ought to be most concerned are those who are already outside the tax system because their earnings are too low. No benefit is conferred upon them by reducing the amount of tax paid by the people in categories somewhat above. The people we want to help most are paying no tax at all; they are paying only national insurance contributions. My recommendation, having studied this subject for a number of years, is that a beginning should be made with the child allowances and family allowances. A beginning, in fact, has been made. I was rather surprised that it was not followed up in the last Budget, but I very much hope that it will be followed up in future.
My specific recommendation to the Chancellor is that he should give selective assistance to the low-income family by cancelling child allowances in the tax system altogether, and, at the same time, increase family allowances to the full amount that his resources will allow.

1.6 p.m.

Mr. Alexander W. Lyon: With the possible exception of the hon. Member for Torquay (Sir F. Bennett), there has been a good deal of unanimity about what ought to be done in the coming Budget. Therefore, I hope that my hon. Friends in the Tribune group will not feel it amiss if I intrude into their private discussion. Indeed, in a recent report in The Guardian a Motion which I had signed was described as being signed by 20 "Left-wingers". It might be appropriate if I add my voice to that of the Tribune group.
I know that the members of the Tribune group take great pride in the appellation "Left". It never seems to me to have any real meaning. I know that they define it by applying it to anything about which they are thinking at the moment. I suspect that that is what they conceive to be a Socialist Budget. It is a collection of measures which they believe at that moment to be right.
On the whole, having listened to my hon. Friend the Member for Lewisham, West (Mr. Dickens), I subscribe to a great deal of what he has put forward. There-

fore, it may be doubted by him whether it is Socialist at all. I suspect, knowing my right hon. Friend the Chancellor of the Exchequer, that he, too, would subscribe to the desirability of most of the proposals put forward by my hon. Friend the Member for Lewisham, West. Long before either my hon. Friend or I was involved in politics, my right hon. Friend the Chancellor was proposing an increased growth rate for the economy. Indeed, it has been a most marked feature of his contribution to political life.

Mr. Michael Foot: I might add that the present Chancellor of the Exchequer once wrote a contribution to a pamphlet called "Fair shares for the Rich" in which the proposal for a wealth tax was anticipated. I believe that we have still some back numbers available for sale.

Mr. Lyon: I was about to come on to that point.
The only advance towards a wealth tax made in this country was by my right hon. Friend in his 1968 Budget, so that there is not a great deal which divides us in terms of principle. This is not an issue of principle. It is an issue of judgment about whether the economy can now stand a greater rate of growth.
In talking about judgment, I find it very difficult to differ from my right hon. Friend the Chancellor. I have come to admire the way in which he exercises judgment, the balance he gives to considerations, and the way in which, after careful thought, he comes down in support of a proposition which, thereafter, he is able to safeguard against all attack since it has been so carefully thought out. Therefore, when my right hon. Friend says that, at present, it is difficult to see how the growth rate can be substantially increased, I have some cause to consider his point of view.
There are two difficulties involved in making a judgment. One is that, if one is wrong, one over-reacts on following occasions. The other and perhaps greater difficulty is that when one is right one thereafter tends to feel more secure in one's judgment than if, on previous occasions, one has been proved to be wrong. If one has been proved to be right on as many occasions as has my right hon. Friend, and often in the


teeth of such opposition as my hon. Friends in the Tribune group were putting up against him last year, and, indeed, in the year before—incidentally, their gloomy analyses last year and in 1968 were proved to be false—it is a little difficult to see why on this occasion they should be proved to be right and he wrong.
Therefore, again I find some doubt, at any rate, in accepting their analysis and rejecting the Chancellor's. Unfortunately, I do reject the Chancellor's analysis. I do so because I am driven to the conclusion that at the moment it is not only the popular demand for an increase in growth; it is the correct demand for an increase in growth. The judgment is really an analysis of how much the economy can sustain without overheating. All of us would agree that it should be driven at the highest rate of growth possible without overheating.
What does the avoidance of overheating mean? I suspect that in the Treasury it means the rate of growth of which the economy is capable without getting into balance of payments difficulties and, therefore, putting a strain upon the parity of sterling. What I believe we ought to mean by the avoidance of overheating is driving the economy at such a rate that we can get the highest rate of growth that the economy can provide without bottlenecks and without acute shortages of labour or materials, so that one has the highest wealth-producing factor in the economy. If at that stage one finds difficulties with the parity of the currency, one ought to take the ordinary mechanical means which are available for adapting the parity.
This is no longer part of the sacred cow of political thinking. Unfortunately, it was up till 1966. Up till then, for any Government to change its parity was regarded almost as a confession of failure by the political party in control. When the French adapted their parity last summer, it was regarded as a political masterstroke. Most people now recognise that the parity of currency was a mechanical device for equating the strength of one's economy with the strength of another economy. Therefore, it is possible to adapt the parity of currency without the political repercussions which formerly flowed from so doing.
I suggest that unless we go for a growth target which substantially increases our resources, we shall always have to adapt our parity because it is an underlying weakness of the economy which drives one into that position. Therefore, it is folly simply to run the economy at a lower level than it can stand in order to safeguard the parity of sterling. Indeed, the situation has changed even since 1966 in respect of the parity of sterling. It is no longer so pre-eminent as a world reserve currency. The Basle Agreement and the agreement for recycling have taken a great deal of the heat out of the pre-eminence of sterling as one of the reserve currencies.
Therefore, it is possible to run the economy at a rather higher rate of growth without encountering the problems in relation to sterling which we experienced, for instance, from 1964 up till 1966. I should be prepared to take that risk as against the risk of running at too low a rate of growth and thereby depriving this country of some of the wealth which could be used effectively for increasing our personal standard of living and our social standard of living.
I recognise that I may be prejudiced in arriving at this analysis by the thought that there is an election brewing, and that it would obviously be politically preferable to have a somewhat higher rate of growth. I have considered that matter carefully because, on the whole, I believe that to do the right thing in politics is far better than to do the popular thing. If one does the right thing, in the end one gets the benefit. If one does the wrong thing because it is immediately popular, in the end the chickens come home to roost. The party which I support has sometimes suffered from the preoccupation with what is immediately popular. But on this occasion I believe that what is immediately popular is also economically right. Therefore, not to do it is absolutely stupid.
I turn to the question whether one can provide the resources for this rate of growth. I do not think that I need trouble the House with too detailed an analysis because I agree with everything that was said by my hon. Friend the Member for Lewisham, West in that part of his speech which dealt with this point. It is clear that from the under-use of capacity by the motor industry and by some of our


other major industries the rate of productivity over the last three years has increased substantially above the increase in production, and, therefore, the capacity in those industries where this increase in productivity has been achieved still leaves room for a greater growth of production.
One of the difficulties of the last two or three years has been that productivity has been rising by about 3½ to 5 per cent., whereas production has been rising by about 2 to 3 per cent. This gap can still be made up, and this is shown by the figures for unemployment. If the unemployment rate is still running at between 500,000 and 600,000 a year, it is clearly wrong to say that there is not the capacity and that there are not the resources available to allow for an increase in the rate of growth. I believe that an increase in the growth rate can be achieved, although I believe it will be moderate. I do not think that we can go to the limits which hon. Members have indicated this morning. For myself, I believe that there is room for something like £350 million.
I recognise, however, that these are arbitrary judgments at any time. Take, for instance, the amount of taxation which has ben taken out of the system in the last two years—about £1,300 million. My right hon. Friend the Chancellor, when he made the judgments on what were in effect three successful Budgets, had to decide what level of consumer demand he had to draw out in order to get the balance of payments surplus that he wanted. His analysis last April was a balance of payments surplus running at a rate of £500 million a year. It is now clear that in the current financial year we shall have about £700 million to £900 millions a year. So that the estimate, at any rate, was an over-estimate.
There is, therefore, even on that estimate, reason for saying that he took a little too much and that, therefore, he can give back a little more. What deters him from giving it back is the upsurge in wage claims in the last few months. This is the concrete question which any Chancellor has to ask at any moment. Granted that one can allow a greater rate of consumer demand over the coming months, and that this will have its effect on increasing growth, should that be allowed

in the Budget if at the same time inflationary wage claims are made which will provide that amount of home demand?
On the analysis of the past, the effect on prices of increases in wages has been remarkably small. The last published figures—those for 1968—showed an increase in wages of about 8 per cent. and an increase in prices in terms of the actual increase in costs of 2½ per cent. The increase in prices in that year of 5 per cent. was made up as to half by the increase in taxation imposed by the budget. Therefore, the gap was between an 8 per cent. increase in incomes and a 2½ per cent, increase in prices.
If it is recognised that this year the increase in incomes will be substantially higher—I judge it to be about 10 to 12 per cent. on the present rate of settlements—the increase in prices which will flow from that, if the same rate of productivity is achieved, will be about 3 to 4 per cent. If what we are worried about is pricing ourselves out of the market, it is probably true that the difference between the present rate of wage demands and those which obtained last year will not substantially increase our industrial costs.
On the other hand, it may be true that this year the rates of productivity increase which were achieved in 1968 and 1969 will be substantially lower because a good deal of the fat has already been slimmed off and, therefore, the increase in prices which will follow from these increases in incomes may be substantially higher and nearer the increase in incomes. That also would flow from the fact that the prices and incomes policy has virtually been abandoned, as to both prices and incomes.
In these circumstances, it is likely that, if manufacturers have higher overheads, they will ask for increases in prices to cover the increases in overheads. If that be so, it is likely that there will be a much smaller gap between prices and incomes in the coming year. If this is true, it is surely right, as the National Institute for Economic and Social Research says, that the amount of extra consumption which is created by an increase in income is relatively small. If so, there is room for the Chancellor in the Budget to allow for a greater increase


in consumption, irrespective of the level of wage claims now pending.
On the whole, I agree in this instance with the National Institute. I know that it forecasts have been wrong in the past. Most economic forecasts are wrong at some time. Even my right hon. Friend, whose forecasts have been much nearer the mark than most, has obviously overestimated in the current year.
Therefore, is it not possible that, given all these factors, Britain can afford a rather higher rate of growth in the coming months than has been the case over the last two years? Would it not be right to at least allow into the economy about £300-£400 million? On my estimate, that would allow for between 9d. and 1s. off income tax, or for the appropriate amount of indirect taxation, or for some of the measures described by my hon. Friend the Member for Lewisham, West.
What we have to contend with at present is a kind of malaise amongst the people, the feeling that somehow or other they have been under constraint for so long. As all of us know, they have not been under anything like the kind of constraint that they think they have. The standard of living has risen consistently throughout the whole period of Labour Government. Though prices have risen by 25 per cent., incomes have risen by 38 per cent. So there has been a substantial rise in real terms in the standard of living.
I recognise that the people are not as badly treated as they think they are. On the other hand, they believe that they are. In almost any factory nowadays skilled and semi-skilled workers say, "If we work overtime we shall have it all taken away in tax". All of us know that this is rubbish. None the less, the mood is important in terms of achieving, first, a higher rate of growth and, second, a more realistic attitude towards the kind of wage claims which should be put in.
For this reason, on the whole I tend to disagree with my hon. Friend the Member for Lewisham, West about how the amount of money which can be put back into the economy this year should be used. My heart is with my hon. Friend. I see the compelling case for helping the lower paid and those who pay no tax. However, in this year it is

important to placate the mood to which I have referred, to demonstrate, particularly to the semi-skilled and the skilled, that there can be a better time ahead, and that there is room for them to earn more and to save more.
Therefore, although this is becoming almost like a Budget speech that might be made by the right hon. Member for Enfield, West (Mr. Iain Macleod), on this occasion I think that I would use this small increase in purchasing power to create the right mood and to make some gesture with it such as taking 6d. or 9d. off income tax, or by taking it off the lower rate of tax, as was suggested by my hon. Friend the Member for Lewisham, West. It should be done all in one lump rather than being spread over. It certainly should not be put into indirect taxation.
It is a question of judgment. I remember that famous judgment of the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), when he took something off surtax and said that this would create a new attitude towards dynamic achievement by all managerial staff and would increase our rate of growth. It never did anything of the sort. It was absolute nonsense.
However, I believe that there is something in this psychological argument at this moment and that it would be valuable, if we have this limited amount to put into the economy, to put it all in one lump sum spread particularly amongst skilled and semi-skilled workers.
Therefore, I support my hon. Friend's general thesis. I do not support in detail the measures he would take to give this amount of reflation, but I am convinced that at the moment nothing is more important for the country as a whole than that there should be a moderate element of reflation in the coming year.

1.27 p.m.

Mr. John Biffen: The hon. Member for York (Mr. Alexander W. Lyon) has made a fairly wide-ranging speech, in common with his hon. Friends who have spoken this morning. I shall confine myself to two aspects of the subjects the hon. Gentleman touched upon. One is the whole question of the continued desirability of having a rigid fixed parity of sterling. The second is the issue of growth. The somewhat time-worn argument about the ability of decisions


taken in this place to affect the behaviour of the economy and the rate at which the gross domestic product expands or does not expand is one with which we are all too likely to become familiar yet again.
A third point upon which I shall touch is the question of the balance which was struck in the philosophy of the Budget presented by the hon. Members for Salford, West (Mr. Orme) and Lewisham, West (Mr. Dickens) between expenditure by the Government derived from taxation and that which was assumed might be available to the Government through savings.
The hon. Member for Salford, West was right to set the scene for his Budget in this season in which advice will be cast upon the Chancellor from all directions by talking about our post-imperial situation. It is in this post-imperial situation that I would like to think of possibly some of the options that exist for us to pursue policies which have a greater degree of economic independence than perhaps might have seemed fashionable a few years ago when there was still a great deal of talk about the rôle of sterling as a reserve currency, when it was felt that we had some special relationship with the United States on account of the dollar also being a reserve currency, and when it was thought that the whole pattern of Commonwealth relationships was something which placed upon this country certain constraints and a respect for what were believed to be international and overriding considerations.
I think that we have a chance to act unilaterally in respect of greater flexibility in our exchange rates, and if we do that we should enable much of the discussion on economic and taxation affairs to proceed in this Chamber in a more healthy and realistic fashion. We would then be concerned with judging the consequences of those policies upon our own domestic situation, and I think and hope that we would remove from the debate a good deal of the somewhat unreal emotions which have surrounded either the fixed exchange rates or balance of payments surplus.
If there is a time when we should go for greater flexibility I should imagine it is when our currency is on the whole strong, and rising strong. I remember

some months back—or perhaps a little longer—when one of the shorthand arguments which was always supposed to end the discussions on floating exchange rates came when someone sagely said "A floating £ is a sinking £." That is utter nonsense and there is no reason why a floating £ should be a sinking £. The graph shows that it has been moving upwards consistently in the last few months, and I pray in aid as a distinguished supporter, Sam Brittain, to say that there are very good technical reasons why we should now be thinking of greater flexibility in the exchange rate.
As the hon. Member for York said, we do not expect the Treasury Bench to comment upon this question because it is in the very nature of the argument that silence is its understood weapon. No one decries this, and is churlish as to expect the Treasury to give a considered view on it but I think it is as well that the Treasury should be reminded that there is a wide and eminintly respecable body of opinion which thinks that this is an opportunity before us.
My second point—and here I stray unashamedly into realms of more direct party controversy—concerns growth. Implicit in the Budget was the idea that somehow decisions can be taken in this House in respect of investment or possibly in respect of alteration in taxation policy which would have as a consequence, an alteration in the overall behaviour of people in this country so that the economy grew at a faster rate than it otherwise might.
I have always regarded this as a certain amount of black magic, and I have never been able to understand what the refined relationships are which take place between the decisions which proceed here and the behaviour in the country at large as a consequence. There was a time possibly when it was thought that the decisions taken here would be proceeded with in a spirit of calm, detached, sharp analysis, presumably because they are from this centre and from those who surround us in the various economic development committees and advisory bodies of one sort or another staffed by various elements of the business community—not always in my view possibly the most successful. We would then proceed to be able to fashion a kind of determinant


advice which would enable this rapid expansion in the economy.
But, of course, the hon. Member for York rather gave it away, because, when talking about taxation, he spoke of "this particular year" and "on this occasion". I may be uncharitable, but I was left with the impression that there were decidedly political factors which were influencing the judgment which he was making about how the Chancellor should distribute the surplus. I honestly think that the emphasis which is being placed upon growth is reprehensible on a number of counts.
To my mind, what a nation does and how individuals divide their time as between work and leisure and their wealth as between current and deferred consumption is really what determines growth, and it is something which they are telling us. I am very sceptical about our ability to tell them, although if I wanted to fashion an argument which would lead to the ever-growing ambit of government, I would seize upon this as being a policy, and I should say that if we controlled investment we could produce a higher rate of growth than might otherwise occur and would ensure that it occurred in other regions than might otherwise be the case.
I can well see the attractions of growth as an argument in the hands of my opponents but I should have thought that they had had some experience which would encourage rather more humility than has so far shown. When the hon. Member for Salford. West talked about the loss of £6,500 million as a result of a lower rate of growth than he thought might otherwise have been obtained, he was doing no more than repeat in slightly different terms exactly the arguments which were used by the Prime Minister in his speech in Swansea in the 1964 election campaign. This idea that somehow or other there is lost production because Government policies have resulted in the overall performance of the nation being different from what it is assumed it would have been if there had not been those Government policies is one which I think is extremely dangerous to quantify.

Mr. Dickens: rose—

Mr. Biffen: In a moment. Obviously, in the very broadest terms there is some-

thing in it. Obviously one does not deny that, but once one gets to the refinements, to the belief that somehow or other one can identify the areas and select the industries and direct the investment and alter the taxation policy, it is very much a question of argument. These are the kind of arguments which we have been having, arguments which lay at the very heart of the philosophy of the National Plan. Much of what we have heard in today's debate is an argument to re-create the conditions of the National Plan now that we have altered the exchange rate and now that there seems to be, for a moment, a prospect of being able to proceed without some of the disciplines which were present in the 1964 situation.

Mr. Dickens: As usual, the hon. Member for Oswestry (Mr. Biffen) is making a very interesting contribution. But does the hon. Member recollect that his right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has tried to quantify precisely the loss in terms of output since 1964 at the absurdly high figure of £12,000 million? Do I detect a further split in the Tory Party between the Powellite wing, which the hon. Gentleman so eloquently represents, and his own Front Bench?

Mr. Biffen: No. I am long enough in the tooth not to be drawn into that kind of argument. The hon. Member for Lewisham, West can, alas, go home and sleep restlessly on that account. I am delighted with the attacks which have been mounted on the Government's economic and financial policy by my right hon. Friends the Members for Enfield, West (Mr. Iain Macleod) and Leeds, North-East (Sir K. Joseph).
I come now to my final point about the dangerous implications of the emphasis upon growth. I suspect that over the coming few years we shall be much more concerned than we have been in the past with a whole variety of environmental considerations. I do not accept the arguments elaborated by Mr. Mishon in his book, but I think it fair to observe that we may as a nation deliberately forgo economic growth on account of greater social and environmental stability. [Interruption.] The hon. Member for Feltham (Mr. Russell Kerr) will be able to rebut Mr. Mishon when he makes his speech,


and I shall be delighted to hear him take on such a task.
We should be foolish if we assumed that the increasing concern with the environment will not have some consequence upon the patterns of economic behaviour. I do not wish to prolong my speech, but I give one example for the benefit of the hon. Member for Feltham. A great deal of the growth in agricultural productivity has come from increasing use of pesticides and other chemical aids. There may well be a revulsion against practices of this kind, they may be made illegal, and there may come to light information not hitherto available which will cause great concern about the continued use of these aids to productivity. Out of concern for the environment, we may make it obligatory on farmers to desist from practices which in the past have had a considerable impact upon rising productivity.
I believe that circumstances of that kind lie just over the brow of the future. It is very slipshod of the hon. Member for Feltham to reject such considerations out of hand, though I have no doubt that he will make his speech in his own way to show that Mr. Mishon and I are wrong.

Mr. Russell Kerr: I do not object.

Mr. Biffen: I am delighted to have made a convert so quickly.
Like all Chancellors having it easy—we are all guilty of it—the hon. Member for Salford, West did not talk much about the expenditure side. He was good on taxation but not quite so good on public expenditure. I was left with the impression that implicit in his philosophy was the acceptance of very high levels of public expenditure. I know that he has views on defence substantially different from mine, but I should have thought that the House would be increasingly concerned about any defence policy which continued such a heavy reliance on nuclear weapons and surrendered the greater degree of flexibility which conventional forces provide. My hunch is that the hon. Gentleman, no less than I, is concerned about provision for domestic law and order, which also will not be got on the cheap, and, certainly, if crime is to be contained not merely by detehrence but by the most

sophisticated treatment of offenders, this, too, will be a task to be tackled.
I have no doubt that mere considerations of population tell us that health and education are areas of considerable dynamic increase for public expenditure, leaving totally on one side how future provision for pensions should be considered, whether by a more embracing and extending State system or by an increasing private system. Moreover, nothing I have heard from the hon. Gentleman would lead me to believe that he would wish to scale down the budget of the Ministry of Technology.
So I am left with the idea that we should have very high levels of public expenditure under the kind of Socialist economy which the hon. Gentleman foresees. In these circumstances, we have to ask ourselves a question which is of considerable moment at present and likely to be of continuing moment as time goes on. In our present circumstances, the Government are able genuinely to borrow very little money. Almost the entire Budget, if not the entire Budget, including the capital expenditure programme of the nationalised industries, has to be covered out of current taxation. Need this always be so? Is there to be no opportunity for the Government to re-enter the situation as a genuine recipient of citizens' savings?
If we want to see one substantial transformation of the disciplines within which we try to operate economic policy, we must look for a situation in which genuine savings are again able to finance a share of public expenditure. I am, therefore, worried and saddened by the conservative old-fashioned prejudices against wealth and against savings which continue to be shown by hon. Members opposite. It is, I suppose, apposite that radicalism has now totally deserted the Labour Party and that hon. Members opposite are left as the ageing upholders of doctrines rooted in the social conditions of 30 or 40 years ago.
In current circumstances, the continuing hostility against investment income contained within our present tax laws, and, in particular, how they treat unearned income, is not justified. To compound that with the introduction of a wealth tax would be folly indeed.
If the hon. Gentleman this morning is at one and the same time recalling, as the


hon. Member for Ebbw Vale (Mr. Michael Foot) suggested, some past views of the Chancellor of the Exchequer expressed in Tribune and anticipating some future action, we are grateful to him, for it will show us and the country that Socialism is dated and irrelevant.

1.46 p.m.

The Financial Secretary to the Treasury (Mr. Dick Taverne): Perhaps it may be appropriate if I intervene briefly at this point. I have carefully noted the interesting points made in a number of serious and valuable contributions to the debate, notably that of the hon. Member for Oswestry (Mr. Biffen), who has just spoken, and who is distinguished in at least two respects: first, that he is my permanent pair; and, second, that in the debates on the Finance Bill in 1968 he was the only one to forecast that we should have to use the regulator.
My hon. Friend the Member for Salford, West (Mr. Orme) began by saying that there was a need for back benchers to contribute to the pre-Budget debate, an important point referred to again by my hon. Friend the Member for Lewisham, West (Mr. Dickens). This very morning, the Select Committee on Procedure has been considering that issue, and I shall read with interest the memorandum which my hon. Friend will, no doubt, contribute, or has already contributed, to the deliberations of that Committee.
The House will understand that I cannot comment on specific proposals. If I were to comment on some and not on others, that might lead to a wrong inference being drawn, so the best course is to comment on none. Nor is this any occasion for a major economic statement. I shall confine myself, therefore, to a few passing observations on the more general points.
First, the balance of payments. It was suggested by some of my hon. Friends that we should pay less attention to the repayment of debt. I am rather surprised that they should take the view that we can, apparently, happily continue under obligations to international bankers. However, apart from that and apart from our actual obligations, it is important that we should re-create the facilities which might enable us in the long term to maintain a continuing and, one hopes, acceler-

ating rate of growth, which would otherwise be prejudiced. Two of my hon. Friends suggested that a substantial balance of payments surplus meant slower growth. They are wrong about that in the longer term. Certainly, the evidence is against them.
This point was stressed by my right hon. Friend the Chancellor of the Exchequer during the Common Market debate, when he pointed out that the evidence is that those countries which have maintained a sustained and substantial balance of payments surplus have also been noted for a particularly high rate of growth. The rate of growth has been the key question underlying the various points made, and, subject to the point that at the margin there may be a conflict between particular forms of greater efficiency and the environment, I think that we all share the aim of wanting to achieve the highest possible rate of growth that is attainable and sustainable.
I want to correct some impressions which have made the record of the past two years seem to be more gloomy than it has been. Manufacturing production two years after devaluation was about 11 per cent. higher, and the growth of the gross domestic product over the two years will turn out to have been on average about 3 per cent. But that growth depends on our capacity to grow, and the difficulty my hon. Friends must recognise is that no one has really been able to show satisfactorily that our capacity to grow is at present higher than about 3 per cent., with the highest estimate putting it at about 3½ per cent.
Of course, this is not satisfactory. An increase in the rate of capacity for growth depends at least partly on a growth in investment, which is not something that can be enormously boosted overnight without reactions and repercussions. The rate of investment must be more gradually built up.
One can boost the rate of growth in the short term and at the same time increase the amount of consumption. When my hon. Friend the Member for Lewisham, West put forward proposals for £800 million—I suggest that the consumption effect would be rather higher—to be injected into the economy, his judgment was perhaps a little optimistic. Certainly, there have been periods when


the rate of growth has been boosted in the short term through boosting consumption. This happened in 1959 and in 1964. The result was the stop-go, and if there is one point on which we are surely all agreed it is that we should never return to the stop-go, which is the enemy of an accelerating rate of growth.

Mr. Dickens: My hon. and learned Friend will recognise that neither my hon. Friend the Member for Salford, West nor I was arguing that we should return to those days. On the contrary, we were arguing for a higher rate of economic growth with certain steps I clearly outlined to deal with the consequential pressures on the balance of payments.

Mr. Taverne: I agree that it was not the intention of either of my hon. Friends to do what was done under other Administrations to produce a special pre-election boom which would be short lived. But the amount by which the growth in the short term can be increased is a matter for the Budget judgment and when my right hon. Friend the Chancellor makes that judgment he must recognise that a higher rate of growth in the short term can be the enemy of a more consistent growth in the long term, which all of us want to achieve.

1.54 p.m.

Mr. John Nott: It is with some tact, and treading rather warily, that I intervene in a debate which is to some extent a private discussion between hon. Members opposite. But I must thank the hon. Member for Salford, West (Mr. Orme) for being kind enough to suggest that the Conservatives might take part—I think that his term was "naturally might take part" and we accept his invitation and shall have a few comments on what he said.
We are very glad that the private discussions—sometimes private disagreements—which take place in the upper corridors of the House between Ministers and their supporters, and which we read about in the Press, have on this occasion come down to the Chamber before the public view, so that we, too, can participate in discussion.
The debate has been congenial enough. I know that the hon. Member for Salford, West and his hon. Friends are completely

sincere in their beliefs. Whether their attitude to economic affairs does a great deal to strengthen the public's impression of the unity which prevails in the Labour Party is not for me to say. Whether it is true, as Tribune asserted this week, that a desperate argument is going on at the highest level in the Cabinet, we do not know, and the Financial Secretary was not prepared to tell us, but it has been worth while having the debate.
To us, the Motion is rather mystifying, because it implies that we have not yet had a Socialist Budget. If we have not yet had one after five years of Socialist Government, I would only ask my guardian angel and those of my hon. Friends to protect us from what might happen if we did. I thought that it would be too horrible to contemplate, but the hon. Gentleman made his suggestions in such moderate terms that I am not quite so fearful as I was. He introduced the subject with great clarity, and I agree with much of his analysis of what is wrong and many of his points about the economic stagnation from which we suffer. Where we part company is in his solution to many of the problems.
If it were mandatory on speakers to express a preference as between the warring factions opposite, I would express a preference for the Tribune forces, who always advance their views with great enthusiasm and verve. They are true skirmishers at heart, and I find this attractive. I know that they recoil from a real battle or from ever committing their forces in our Lobbies, but they add a great deal of interest to our debates.
At their head, when disposed to lead them—and I understand that perhaps the hon. Gentleman will not be leading them today—is very often the hon. Member for Ebbw Vale (Mr. Michael Foot). Perhaps he will seek to intervene when I sit down. That is something he often seems to do. I sometimes think that he is a little like an ageing Prince Rupert, still adept at the cut and thrust of debate, conscious of the applause of the populace, but perhaps never quite showing the persistence and plodding determination which are necessary to win his arguments at the end.
We have been very fortunate with the advance billings of the debate, which have been displayed most prominently


for a week or two in those sister journals of opinion, Tribune and The Times. The hon. Member for Lewisham, West (Mr. Dickens) is very adept at public relations. If he were as good at his economics we should listen to him with even greater respect. The hon. Member for Salford, West was quoted in The Times as saying:
This year we want to rip the veils aside and give the Chancellor some constructive suggestions.
It is not for me to say how much ripping the hon. Gentleman has done today, but he has made some constructive suggestions and I know that the Chancellor will have welcomed them.
The Financial Secretary had an easier task than I, because he opened his speech by saying that he could not really say anything. I know that he is a loyal friend of the Chancellor, and that he has been cast in the past few weeks in the role of Cautious Dick. "Do not expect too much from the Chancellor", is the message. "He will do the right thing by the nation. He will be tough and ruthless, even if it loses the Government the election and every Socialist seat". That is the message, and it is understandable, because if the Chancellor should present an expansionary Budget and give some pre-electoral offerings to the people he will be covered in glory.
The hon. Member for Salford, West, who has already laid claim to the reduction in the Bank Rate, will be able to tell his constituents that the debate was an important turnings point in history, and everyone on the other side will be satisfied.
I now come to the implications of the Motion. They are devastating for the taxpayer. Since the Government came to office, about £3,000 million of additional taxation has been levied—and this without counting in an additional £1,000 million on national insurance contributions. Yet still it seems that we have not had a Socialist Budget. The term "Socialism" means different things to different people, as my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) pointed out. I think that there would be some disagreements opposite about the definition. To those on this side who are not privy to the definitions which exist opposite, it only

seems that we have had five years of Socialism and of Socialist Budgets, which is much too much.
Both the hon. Member for Lewisham, West and the hon. Member for Salford, West referred to education. Between 1959–60 and 1964–65, expenditure on education rose in real terms by 45 per cent.; during the period 1964–65 to 1969–70, it has risen by 27 per cent. I do not think, therefore, that the assumption should always be made by hon. Members opposite that expenditure on education was not at a rapidly increasing rate during the period of Conservative rule. Indeed, it was far greater than it has been in the last six years.
I agree with the hon. Gentleman's analysis that the record of the Labour Government, in improving the conditions of the average wage earner, is not satisfactory. I am sure that the hon. Gentleman will agree with these figures. In October, 1964, the average weekly wage was £18 10s. after 8s. in family allowances. National insurance contributions and income tax took 36s., leaving a net disposable income of £16 14s a week. If we adjust that to present-day purchasing power, to the fall in the value of the £, the £16 14s. is worth the equivalent of about £20 13s. today.
In November, 1969, the average weekly wage was £25 19s. 7d., after 18s. in family allowances. But national insurance contributions and income tax now take £4 17s. 3d., leaving a net disposable income of £21 2s. 4d. This means that the average wage earner is now only 2·2 per cent. better off after five years of Socialist Government.

Mr. Orme: We are saying, as the hon. Gentleman is saying, in effect, that we want to see improvements for lower-paid workers. But he must also take into account the benefits which the Government have introduced, such as wage-related benefits and unemployment pay, and so forth. The social wage must come into this as well.

Mr. Nott: I do not deny that, and I was coming to the point about the tax threshold, which is important. I am only pointing out that, in 1964, income tax and national insurance contributions took 36s. a week from the average wage earner and that today, after five years of Labour Government, the figure is £4 17s. 3d.
I agree that this is an unsatisfactory situation for the average wage earner and even more unsatisfactory in some cases for the person who is below that level. I hope, however, that hon. Members opposite will also give some thought for the millions of elderly people, unrepresented by the trade unions, who are living on fixed incomes from their savings accumulated by thrift throughout their working lives. Their £ is today worth the equivalent of 16s. 9d. if one takes the equivalent purchasing power. They have had a fall in their real income of about 15 to 17 per cent.
What moral justification is there for singling out the earned income allowance for special treatment in a Budget? I believe that the only fair course is for a cut across direct taxation generally, because otherwise one section of the community will be benefiting and, to some extent, it will be the section which has been protected from a rise in money incomes in a way in which the fixed income retired people have not.
I shall not raise the issue of child poverty, because it is an emotional one and I seek to make no party capital out of it.

Mr. Orme: It earns no popularity.

Mr. Nott: I agree. I have read the letter by Mr. Peter Townshend and Mr. Frank Field in The Times. Nevertheless, the Government must face the fact that their charge is
that low-income families are relatively worse off now than in 1964.
I have read the answer sent to The Times by the right hon. Member for Sowerby (Mr. Houghton) and others, and, of course, many of the points made in that letter are true. But this week Mr. Townshend, in a letter to Tribune, states specifically:
We try to present the facts as fairly and objectively as possible and we make no apology if the government, for that matter any government, finds them embarrassing.
I will not go into the question whether his charges are correct or not. I accept that the aim of hon. Members opposite is the abolition of poverty. It is ours as well.
Now I turn to the question of wealth. The creation of wealth was rising by about 5 per cent. a year between 1960 and 1964. Between 1964 and 1967, it was rising at about one-third of that rate. If the rate of increase we achieved during those years 1960 to 1964 had continued, we would have accumulated in wealth about an additional £11,000 million over the past four or five years, equivalent to about £700 per household.
I quote another fact about the distribution of wealth. The figures come from the Inland Revenue statistics. Between 1960 and 1964, an additional 1½ million people became wealth owners. Between 1964 and 1967, the number of people who came out of that bracket was 2 million. So the total number of people—I am talking of savings right down to £1,000 and below—owning wealth is 2 million less than in 1964. This really is a condemnation of the Government. I am not referring to a few hundred thousand people, but to the 19½ million who hold some savings in this country. I am not talking about those who earn £50,000 and more.
I come now to the question of a wealth tax. I have no doctrinaire objection to the idea of a wealth tax. I am against it only because of its damaging effect on savings. The savings ratio has fallen seriously from 8·1 per cent. of after-tax incomes in 1964 to an estimated 7·3 per cent. in 1969. The trouble in this country as I see it is not a temporary excess of domestic demand over domestic production, but a permanent in-built bias for consumption to exceed production. The danger is that any increase in capacity is quickly compensated by an equivalent increase in consumption.
I take these words out of "Into the Seventies", the Labour Party's own document, for they are the best arguments against a wealth tax which I have heard. I quote:
And since any new capital taxes, such as a wealth tax, might be paid out of capital or at the expense of current savings, the extra revenue could clearly not be directly traded off for general cuts in income or purchase tax, because of the obvious effects on consumption.
I have said that our problem is the permanent in-built bias for consumption to exceed production, and in that case the only way out of the dilemma is to encourage more savings. It so happens


that richer people have a very high savings ratio. We must recognise this fact. We cannot put more penal taxes upon savings, investment and wealth than we already have. We have a differential tax on investment income, we have estate duty and stamp duty and capital gains tax. These are all indirect taxes on wealth, and I genuinely believe that to introduce a wealth tax would have an extremely damaging effect on savings and investment; and that is something which this country cannot afford.
I refer, finally, to our rate of economic growth and to the resources we have lost. The hon. Member for Lewisham, West estimated these as being about £6,500 million. My figure is £11,000 million. Whichever it is, it represents between £400 and £700 per household. That is the amount of growth and the amount of wealth which ordinary people have lost as a result of the shortfall in economic growth during the last five years.
I come to future policy. I have been critical of the Labour Government's record and I should like now to say how I personally wish to see things go from here. We have behind us, I hope for ever, a permanent loss of growth. The running inflation which we had in 1965 and which led up to the Government's victory at the election in 1966, the national shame which followed that of begging round the banks and chancellories of the world to borrow; the enforced not the chosen devaluation which followed, were things which I hope will never happen again. On this record, if the Chancellor of the Exchequer were to err on the side of caution about the level of demand, he would certainly not be criticised by me.
But there are two quite different ways of ending the stagnation which we suffer. With some of the solutions suggested by the hon. Member for Salford, West I agree. The current rate of growth is pathetically low. In my view, although there is no economic reason at present for stimulating personal consumption, there is some good reason for reducing monetary controls and for some kind of relief of our present hire-purchase restrictions.
The National Institute for Economic and Social Research has been mentioned.

Surely it has its figures wrong. Its estimate of a 1 to 1½ per cent. increase in consumption over the following year seems extremely low for a year in which there will be no additional fiscal or monetary restraints. I quote the words of Mr. Sam Brittan in the Financial Times of two days ago:
…it is scarcely credible that anyone can advocate a general boost to demand with money incomes rising at their present rate.
I agree very much with that, but none the less serious bottlenecks are developing in certain industries particularly the engineering industry, our leading exporting industry. It is running up to the limits of capacity. I always think that figures disguise a lot. The Financial Times Industrial Survey for February, however, showed that in non-electrical engineering, usually the first bottleneck in any boom, 81 per cent. of companies replying were being affected by shortages of manual labour.
There seems to be an urgent need to stimulate industrial investment, and I entirely agree with the hon. Member about that, if we are to avoid another crisis when stock building begins again and if we are to avoid another balance of payments crisis when the brakes on personal consumption come off. I think that the optimism of the Treasury and the Board of Trade in this area is misplaced. We must now create more capacity if we are not to come up against its top limit very quickly when personal consumption builds up again.
I do not deny the age-long predicament of all Chancellors of the Exchequer of how to stimulate industrial investment without over-stimulating personal demand. One way is to find the resources in the public sector. I fear that the Government, certainly not the hon. Member for Salford, West, will never take the necessary measures to reduce the size of the public sector and its overall demands upon our resources. That must come from us. But this is the solution to the problem—a reduction in the size of the public sector.
This being the case, all the arguments now, as the Government will not cut down the size of the public sector, point to a relaxation in the monetary and credit fields, but not in the fiscal area. In spite of the latest figures from the banks


I still think that we have a major squeeze on industrial investment. We have it on the building trade, which hon. Members opposite have mentioned. I agree with them that the Bank Rate could well have been lowered on Thursday by more than ½ per cent. Some country has to give a lead in reducing world interest rates and that lead will not come at present from Germany or Italy, and it may not come even from the United States. The grounds which led to the reduction of Bank Rate—the strong inflow of hot money—could have supported a greater reduction, and it would also have done something to stimulate psychologically a greater degree of industrial investment.
We appreciate entirely that the Chancellor is determined to repay all the central bank indebtedness, amounting to around £2,000 million. I understand that entirely, but his success will be measured not by its timing, but by the manner in which it is achieved. In present circumstances, I would not be a bit surprised to find the Chancellor announcing reasonably shortly that all the central bank debts had been repaid. By roll-over arrangements by using S.D.R.s, the proceeds of the dollar portfolio, the retention of import deposits and the attraction of hot money at an artificially high level of Bank Rate, it can certainly be done, but the question we have to ask is: at what cost? Are we to pay for the repayment of these debts, something which the Chancellor dearly wishes to announce, by paying higher rates of interest on foreign deposits than we have to pay to the central banks, by giving away to foreign depositors the rise in capital values in the gilt-edged market, by putting ourselves at risk to future outflows of hot money, which have done us so much damage in the past, and by holding back on industrial investment which is urgently required to provide capacity for the coming upturn in demand? Must we repay our central bank indebtedness with undue haste and suffer great damage to other parts of our economy as a result?
Secondly, there is no valid excuse for continuing to retain import deposits. They are doing our trading relations continuing harm at a time when we are running a greater surplus than our trading partners. The adverse effect on our balance of payments has to come and the Chancellor should face it now.
Thirdly, this is the moment for some relaxation of the controls on overseas investment. They are too severe and they are doing great damage to the country's future. I find the views of the hon. Member for Lewisham, West quite intelligible—although I do not agree with them—until he starts on his favourite theme of selling our investments overseas. Then I do not understand his argument, let alone agree with it.
It is clear to me that what the country wants is not a Socialist Budget. We have had seven of them and it is possible that the hon. Members would be even more severe upon the taxpayer, who has already suffered an additional burden of £3,000 million.
What the country wants is a Conservative Budget and, contrary to the predictions and the fearful warnings of the Tribune forces, it will achieve much that they seek—higher growth, more concentrated help for the needy, lower taxes on earned incomes. Hon. Gentlemen opposite always smile at this, but the records of the two parties proves that this is so and the people know it. The route to this objective lies in using a period of stability to set the economy free, to restore consumer choice and to stimulate growth through the encouragement of market forces.
It will come by harnessing ordinary decent human aspirations to the public good—aspirations such as the desire to save more for security in old age and for sicknes rather than have the Government do it for people. My hon. Friend the Member for Kensington, South (Sir B. Rhys-Williams) has referred to the National Superannuation Bill, now going through the House, as an example. There is the wish to leave a reasonable provision for our families, without having it removed by tax and redistributed to some other fellow; the freedom to travel and invest abroad and run a business without the endless interference of bureaucrats and politicians of the Left.
It is not asking very much except that the politicians of the Left should cease using taxation as a weapon to inflict their prejudices and doctrines on the people who do not even share these doctrines and these prejudices. I sum it up by saying that we want a more competitive society, yes, but it must be a


compassionate one, too. They are irreconcilable objective.
I make no apology for claiming, once again, that we still have the most tolerant, the happiest and the most pleasant country in the world in which to live. We are more likely to retain this priceless asset under the good management and the economic freedom of a Conservative Administration than with the continuance of the present Government who have lost their momentum, lost their ideas and abandoned on the way many of their traditional principles.

2.23 p.m.

Mr. Eric S. Heffer: I cannot make my speech without, first, referring to the comments of the hon. Member for St. Ives (Mr. Nott). The picture he has painted of the competitive but compassionate society is somewhat different from my experience, and that of my parents and their parents, of a Conservative-controlled society. The competitive society before the Second World War resulted in millions of unemployed people living on the absolute minimum of money. Those workers have not forgotten those days; they have not forgotten that we did not have a National Health Service which is concerned with looking after the ordinary person and ensuring that no enormous burdens fell upon them.
There was certainly no compassionate society in the days of unleashed competition when hon. Members opposite had complete control of the country's affairs. Even over the last 13 years, prior to the Labour Government coming into office, we found that the boundaries of social security were always hemmed in and held back by the party opposite. The frontiers of social security, the benefits to our people, are extended and developed only when this side of the House is in control of the affairs of the country. I could give plenty of examples of the differences between the way the country is run when the Conservatives are in control and the way that it is run for the benefit of the mass of the people when we are in control.
I had to make those remarks, because it was necessary to get rid of the "phoney" picture which has been painted by the hon. Member. My hon. Friend the Member for Salford, West (Mr. Orme) has done a great service in

bringing this matter to the Floor of the House today. The hon. Member for St. Ives said that the differences in the Labour Party were being brought to the Floor through this debate. I do not think that the differences within the Labour Party have been brought to the Floor; what has happened is that my hon. Friends have put forward their ideas of what the Budget should be. They are not necessarily saying that every dot and comma should or will be accepted by the Chancellor.
We have had a very good example of the differences within the Tory Party, brought before us by the speeches of the hon. Member for Oswestry (Mr. Biffen) and the hon. Member for St. Ives. The hon. Member for St. Ives said that we had lost something like £11,000 million worth of growth under the present Government, unused capacity he said. The hon. Member for St. Ives is an interventionist, following the official Conservative line, whereas the hon. Member for Oswestry, who is not an interventionist, said that it did not matter what decisions we took in the House because they have no connection with the reality of what happens outside.
I am sure that his right hon. Friend the Member for Bexley (Mr. Heath) does not take that view, nor do the majority of his hon. Friends. What we heard from the hon. Member for Oswestry was, however, the authentic voice of the Conservative Party, the growing voice of the Right wing, which is increasingly pushing the party, through the speeches of the right hon. Member for Leeds, North-East (Sir K. Joseph), into a totally impossible position over the economy of the country.

Mr. Biffen: That was a fairly generous reference to me. Let me assure the hon. Gentleman, first, that he has a very inflated idea of the significance that I or my views have, and, secondly, that no one reading tomorrow's HANSARD will recognise my speech from the caricature of it which the hon. Gentleman has just given.

Mr. Heffer: Obviously, any hon. Member hides behind that excuse once his argument is exposed. It has been clearly revealed that hon. Members opposite have a fundamental disagreement and it has been spelled out on the Floor of the House.
But I do not want to dwell on this, but simply to make that point, because the hon. Member for St. Ives referred to the disagreement in the Labour Party. Of course there are differences of opinion in the party; no one hides that. What sort of a party do we want? Nye Bevan once said that there are no differences in the churchyard, because everyone is dead. We do not believe in a party like that. We are not dead.
We believe in trying to build a new society, and a party which is trying to change society inevitably has arguments about which is the best way to pursue that objective. There are many other things which the hon. Member said with which I would like to deal, but I will have to leave them so that I can develop my own arguments, with which I am passionately concerned.
We owe a great deal to my hon. Friend the Member for Salford, West for choosing this subject for debate today, and for giving us an opportunity to raise matters which we hope, will be dealt with in the forthcoming Budget. I want to pay a compliment to the Chancellor and his right hon. and hon. Friends. There is no doubt that the situation today is far healthier than it was in 1964. The deficit on the balance of payments has been turned into a surplus, the money borrowed from the I.M.F. is being repaid—and I agree that it has to be repaid. I do not want this country to be under any obligation to the international bankers. I understand that the rate of repayment is fairly rapid. Our gold reserves are stronger than they have ever been, and the £ is very strong. All these are solid achievements, and no one should discount them.
We began to get back on our feet when the very wise decision, which was opposed by the Opposition, was taken to devalue. That was the decisive moment in the recovery of the country. We also wisely and sensibly decided to withdraw from our military bases east of Suez. The two things together have resulted in the much healthier position today. It was absolutely vital to introduce the import deposits scheme. It was right to take control of capital going overseas, although I felt that not sufficient control was taken. I fully support those measures. It has been proved that they were fully justified.
We are now in a new situation in the sense that we have a balance of payments surplus. I am not arguing that we should change our policy just because we are in an election year, although I do not discount the fact that we are in an election year. No politician with any understanding of politics would discount that fact. In addition, the Deutsche mark has been revalued and the franc has been devalued. Our exports have greatly improved and productivity per person has greatly increased.
The one thing which has not improved is our growth rate. It has remained much smaller than it should be. It is between 2 and 2½ per cent. In that situation, there is definite need for a reflation of the economy.

Mr. Taverne: I do not know why my hon. Friend says that the growth rate—

Mr. Speaker: Order. It will help the reporters if the Minister addresses the Chair. He can address the hon. Member for Liverpool, Walton (Mr. Haffer) through the Chair so that the reporters can hear.

Mr. Taverne: Why does my hon. Friend suggest that the growth rate is 2 to 2½ per cent. when taken over a period it has been running at about 3 per cent.?

Mr. Heffer: I do not deny that over a period the growth rate has been slightly higher, but at present it is about 2 to 2½ per cent.

Mr. Taverne: indicated dissent.—

Mr. Heffer: I am prepared to be convinced on this point, but the T.U.C. is not entirely convinced, and nor am I.
The 1970 economic report of the T.U.C. is absolutely right when it points out, on page 15:
The situation today is that unless there is an early expansion of effective demand, the prospect is one of an unnecessarily underemployed economy".
I agree with the programme which the T.U.C. puts forward in its document for the reflation of the economy. It says that a reflationary programme must take regard of three things: first, social and economic priorities, including priorities in the redistribution of income;


secondly, import content and the effects on export competitiveness; and, thirdly, sectors with under-employed equipment and manpower.
I wish to say a few words on the last point because of concern for, and interest in, the building industry. If ever there was an industry whose manpower and equipment were under-employed it is the building industry. Approximately a quarter of the male unemployed figure is in the construction industry. The number of unemployed for January this year was 139,000. At the same time, the industry has only one-fifth of male job vacancies.
The important point made in the T.U.C.'s document is that the import content of the industry is low—only about 10 per cent. of the value of the final output. It goes on to point out that in 1969 we completed 367,000 permanent new dwellings against 414,000 in 1968. The T.U.C. put it in this way:
Consequently, deliberate measures to increase the rate of house building and improvements in existing properties should have a high priority at the present time".
I agree with that.

Mrs. Anne Kerr: Would my hon. Friend agree that selective employment tax should not apply to the construction industry?

Mr. Heffer: I have made many speeches in the House in which I have said that I did not think that the selective employment tax should apply to the construction industry. I have been a consistent critic of its application to the building industry, which, I feel, is not a service industry and should never have been categorised as such.
There should be a further reduction in Bank Rate. The ½ per cent. reduction is a step in the right direction, but we need a further reduction. I do not think that any hon. Member, including any on the Treasury Bench, would disagree that that is most desirable. They might argue that it is not possible at the moment, but it is certainly desirable.
Secondly, private builders engaged on house construction should be included in the priority categories for bank lending. This is absolutely essential if we are to step up the house building programme. Thirdly, the ceiling on local authority

mortgage loans for house purchase should be raised from £100 million to £250 million in 1970–71. Fourthly, there must be an immediate increase, in particular, in school building.
The other day, my right hon. Friend the Secretary of State for Education and Science stated that more money was to be made available to local authorities for the minor works school building. This is a step in the right direction, but we must go much further and help the school building programme and so increase employment in the building industry.

Mr. Orme: The point which I omitted to make was that the 4 per cent. mortgage loans now given to local authorities should start at the beginning, and not at the end, of construction.

Mr. Heffer: That was to have been my next point, but I will not now develop it because my hon. Friend has made it for me.
I would, however, like to make one comment on the 4½ per cent. interest rates to local authorities. I take the view, as does the T.U.C., that the rate should be reduced. Hon. Members opposite will not support that proposal because they are, in any event, opposed to subsidies to local authorities for council house building.
Incidentally, I had a reply to a Question today which states that in the City of Liverpool alone, if the subsidies were removed there would be an increase in rents for people in council houses of about 43s. per house. I put that point forward for people to bear in mind when they think of the argument for reducing subsidies—the compassionate society for which the hon. Member for St. Ives was arguing a little earlier.
We therefore submit that there should be a reduction in interest rates for local authorities, but we would like this also to apply to other types of local authority construction. Local authorities build schools, for example, and a two-tier system of interest rates for local authorities to build that sort of priority work is, in our opinion, essential. That is why we argue the case.
I wish to make one further comment concerning the removal of public schools from their charitable status. The money that we would derive from this would be


peanuts when viewed against the whole Budget. It is merely one example of the peripheral things that we could do.
The Public Schools Commission clearly had that in mind when issuing its report, page 159 of which said:
It has been argued that the public schools have as much right as the universities to do as they like with their endowments, but there is a fundamental difference. Entry to the universities is not barred to candidates whose parents cannot afford to meet the cost.
It goes on to say, in page 160:
In favour of action is the argument that we have here a plain anomaly, due to the complexities of the English law of charities, by which benefits are enjoyed by institutions which are, for the most part, only in a technical sense performing a charitable function. The typical public school is, after all, an institution providing a service, on the basis of private choice and for substantial fees, to people able and willing to pay those fees. It is not easy to defend provisions by which such institutions (and indirectly their fee-payers) receive via charitable reliefs, what is in effect a subsidy from the taxpayer and the ratepayer.
The report states, in paragraph 366:
Granted that these are the two alternatives"—
it gives another alternative in the course of this lengthy document—
the majority of us think that the weight of the arguments against what are in effect indirect subsidies from public funds is such as to indicate which course is to be preferred. Accordingly, we recommend that the fiscal and other benefits which follow from charitable status should be withdrawn from all independent schools which at the time of the appropriate legislation receive the greater part of their income from sources other than the payment of fees by public authorities or by charities.
That is fairly clear. I hope that in his remarks on the Budget, my right hon. Friend the Chancellor of the Exchequer will, in passing, as it were, throw in by a slip of the tongue that public schools will no longer receive their charitable status. I hope that he will do this as merely one of the small items in the whole Budget.
The proposals which have been put forward this afternoon by my hon. Friends are immediate proposals which, although we call them a Socialist Budget, do not add up to Socialism. We are merely suggesting certain immediate proposals which move in a Socialist direction. For the benefit of the hon. Member for St. Ives, may I say that Socialism means the ending of the class system of

society. It means that we build a society in which the means of production and distribution are publicly owned and democratically controlled by the people. That is what I want to see. Part of that process will mean that the financial levels—the City of London, the finance houses, the insurance houses and the great banks—are brought under public control. That is what I believe in. That is what I want to see brought about ultimately.
We are not suggesting anything revolutionary of that kind in the Budget. We are only suggesting a small advance towards that concept. Hon. Members opposite should not be unduly concerned that we are about to revolutionise the whole of society. But let there be no doubt about it. We believe in the ultimate transformation of our society into a decent, humane, egalitarian society which adds up to a democratic Socialist society.

Several Hon. Members: rose—

Mr. Speaker: Order. I have appealed, without much success so far, for reasonably brief speeches.

2.48 p.m.

Mr. A. W. Wiggin: After two days of listening to strategists, I am sure that you would agree with me, Mr. Speaker, if you were in a position to do so, that after listening to a day of economists the more one hears of experts the more one finds that they are unable to agree. Perhaps, however, no such criticism should be levelled at the hon. Member for Salford, West (Mr. Orme), and in view of his speech it may be that I can take up one or two of the points he mentioned before going on to other pastures.
First, however, I should like to congratulate my hon. Friend the Member for St. Ives (Mr. Nott) on what may well have been his first speech from the Opposition Front Bench. It was a masterful performance and I am only sorry that there were not more Members present, on both sides, to hear him.
If I start by mentioning development areas, I am sure that my hon. Friend will be sympathetic, since the development area of the South-West now has the invidious distinction of heading the league of unemployment in development


areas. I believe that here the Conservative Party has to be extremely careful about its proposals for dealing with this problem.
There is an economic theory which says that unemployment is beneficial up to a certain level and a theory which holds that the fear of losing a job will make a man work harder. I utterly reject that. I believe that it has completely failed. It does not work and we would be most uncompassionate if we believed this to apply.
It is, therefore, very necessary for us to look at ways to help areas which, because of their geographical and historical nature, have a high level of unemployment at present. What is certain is that the present Government policy of direct grant to assist these areas has been wasteful; it has not produced good value for money, and, above all, has not created the necessary jobs to alleviate the problem.
The hon. Gentleman also mentioned value-added tax, on which I do go some way with him, at least in wishing to see it examined most closely. Since I heard my right hon. Friend mention the subject at my party's conference, perhaps I might just explain that, as I heard him, he said only that we would examine it. I would add that, if he is to examine it, I hope that he will look very closely at two aspects.
The first is its complexity. Taxation should be simple. One of the biggest faults which we in this country have committed for the past 60 years or more is that of having taxation which is too complex. Secondly, as a representative of an area with a substantial number of hotels and tourist interests, I am bound to say that the implications of value-added tax look not too good for that industry.
I quite agree with the hon. Member for Lewisham, West, and indeed, many other hon. Gentlemen, on the question of a cut in the Bank Rate. It has always interested me to see who, in these debates, is in business on his own account and having to cope with the vicissitudes and difficulties brought about by Government action. Those of us in business may suffer because of a shortage of credit, but shortage of credit has not been as important as the expense of credit.
I myself have certainly found that it is not so much a question of borrowing more money as it is a question of being able to pay for the money which I have already borrowed. Any cut in Bank Rate is entirely welcome, not only to the farming industry, which is my own, but right across the board to try to get this country's economy growing again.
On the question of the growth rate, hon. Gentleman opposite, I find, are lacking in specific detail. It is easy enough to say that we must make the country grow, but it is not so easy to translate that statement into actual practice on the shop floor which is where the small business man, the retailer, the trader and manufacturer is actually working. It is lack of confidence and the expensive position of credit, which we need at the moment, which are holding the country back. I am no great lover of joint stock banks. There are few people who do their business at such a low rate of risk but, at the same time, to accuse them of being in any way responsible for our present difficulties is totally erroneous.
As the question of nickel shares was mentioned, perhaps I may be allowed to point out the substantial amount of capital gains tax which is likely to be the result of somebody discovering a mountain of nickel in Australia, but I am sure that the hon. Gentleman, like me, if he had held a substantial number of Poseidon shares—although unfortunately, I have not—

Mr. Orme: This issue of Poseidon shares shows up the stock market and the gambling which is going on in natural resources. I hope that the people of the country will take very careful note of that.

Mr. Wiggin: The hon. Gentleman fails to realise that if natural resources are discovered then, quite naturally, by the process of the stock market these are exchanged into stocks and shares. I see nothing wrong in that, nor, indeed in the so called gambling to which the hon. Gentleman referred.
I did not intend to mention the question of the public schools, but since this has been brought out by the hon. Member for Liverpool, Walton (Mr. Heffer) I would just remind him that this is not related only to the handful of public schools about which he feels so strongly,


but also to many other, smaller schools which may have their own foundations.
I was fortunate enough to be a feoffee of a small school set up in the Midlands in the middle of the 16th century by an industrialist who left some farm land. That land has been built upon and its value is a substantial amount of money which we, as trustees, were able to disburse for the benefit of the school. Largely, the boys who went to that school were the sons of Servicemen, and so on. Very substantial help was given by the creation of this charity. So I would ask hon. Gentlemen opposite to be very careful about condemning this sort of thing out-of-hand on a purely political basis.
We shall never agree on the question of the basic principles which they have propounded and, therefore, I shall not attempt to discuss them today because it would be a fruitless exercise, but I am bound to say that I do not believe that it is the wish of the people of this country to see the level of public expenditure expanding—

Mr. Dickens: Of course it is.

Mr. Wiggin: —and the Government taking money out of people's pockets and spending it as the Government wish. Freedom of choice is what the people want. They wish to be able to spend their money in their own way.

Mr. Dickens: Do not the people of Weston-super-Mare want better education, better hospitals, better roads, and better provisions generally for housing? If they do, how are they to be paid for without public expenditure and a higher rate of public revenue and a much greater rate of economic expansion?

Mr. Wiggin: Nobody has suggested that we want to abolish all taxation and all Government expenditure. We realise that that is impossible, but there are fringe items of expenditure which have been mentioned, council house subsidies, prescription charges, and so on.
Let us be quite clear, since the hon. Gentleman mentioned council house subsidies, that there are substantial numbers of people with family incomes far in excess of that income which makes subsidy from the central Government sensible.

It is these types of economies which people want.
We live in a capitalist society. In the whole of the free Western world, we believe in capital. We believe in it—[HON. MEMBERS: "You do."] We are opposed—

Mrs. Anne Kerr: That is why we are here.

Mr. Wiggin: —to the Communist society which leads to total State possession of all industry, all resources and all commerce. It is no use attacking capital if we wish to see our society remain as it is at present—[HON. MEMBERS: "We do not"] If hon. Members opposite do wish to see progress towards a Communist society, I am more convinced of what will be the result of the next General Election. Quite clearly, hon. Gentlemen opposite do not understand the argument, but I am not deterred by that, because I do not expect them to.

Mr. Orme: rose—

Mr. Speaker: Order. The hon. Member for Salford, West (Mr. Orme) has been listened to at considerable length.

Mr. Wiggin: If hon. Gentlemen would appreciate the point I am trying to make they would accept that preservation of capital is important and vital to the existence of a capitalist society.
That being so, I should like for a moment to examine the problem of capital gains tax. Since others have given their opinion upon it, I see no reason why I should not as well. It can be argued that short-term capital gains tax is a fully equitable measure. If, for example, a picture dealer makes a profit by buying and selling a picture, that dealer pays tax. Until the introduction of short-term capital gains tax, an individual could buy and sell a picture without paying tax on the profit, and this was inequitable, but I believe that long-term capital gains tax will have a serious effect. If ever there was a Socialist measure which, in the long-term, will destroy wealth, it is this one. That may satisfy hon. Gentlemen opposite, but it will not satisfy me or the large number of people who want to be able to save and to keep some of what they save; indeed, saving is the motive for their efforts.
May I suggest that the long-term capital gains tax should be cast at a higher level, say, at 50 or 60 per cent., but that the rate of tax should be allowed to decline with the continuance of possession of the article over six, seven or eight years? This would ensure that a person building up a small business from nothing would benefit from his industry, and a person who acquired a possession which increased in value with the passage of time would be allowed to benefit from his wisdom and judgment. Long-term capital gains tax is responsible for many of our young men going abroad. The Australians have recognised this by their attitude to long-term capital gains tax.
Much the same argument applies to death duties. What incentive is there for a young man who wishes to save money? He may save it and keep it in the form of a house—a most commendable object—but he can save it only after he has already paid an extremely high rate of taxation upon it. He is allowed to enjoy it when he has saved it, but only for a short time. When he dies it is taken away from him and his family. Without the saving and preservation of capital the country will be economically weakened to the point hon. Gentlemen opposite may wish to see, but I do not believe that it will be to our benefit.

3.0 p.m.

Mr. Russell Kerr: In the world of show business there is a piece of advice—"Never follow a good act". I am in the difficulty of following no fewer than three good acts. I refer, of course, to the speeches of my hon. Friends the Members for Salford, West (Mr. Orme), Lewisham, West (Mr. Dickens) and Liverpool, Walton (Mr. Heffer), each of whom made an excellent contribution to the debate.
My hon. Friend the Member for Salford, West, by his initiative in introducing the Motion, has done a signal service to the cause of free discussion and democracy. I would like to see this initiative reflected in a more permanent arrangement as we approach the budgets of 1971–72 and thereafter. By the internationally recognised criteria for judging the speeches of Chancellors of the Exchequer, namely, the number of useful and/or productive ideas per 30 minutes

of oratory, I rate the contribution of my hon. Friend the Member for Salford, West as being of the highest calibre.
I am anxious that my hon. Friend the Member for Norwood (Mr. John Fraser) should have time to introduce the Motion in his name, if he catches your eye, Mr. Speaker, so I shall be brief.
I am the last person to want to take away the credit that the Government can justifiably claim for the remarkable switch in the balance of payments position from an approximate £400 million deficit in 1968 to an approximate current surplus of £500 million plus, but we must keep a sense of perspective. We have come a long way round to do this, and the solvency which we have achieved has been at considerable cost.
Maq I look briefly at several factors which have been responsible for the present situation? Following devaluation in 1967, there was an increase in exports between 1968 and 1969 of 14 per cent. Over the same period, our imports rose by a modest 5 per cent. Whereas in 1968 our imports exceeded exports by nearly £700 million, by the second half of 1969 the positive balance of exports over imports was happily about £50 million.
We should look a little deeper at the reasons lying behind this situation. When we consider the main reason that limited the level of our imports, we reach a rather less satisfactory explanation. There is no doubt that the generally righ rate of taxation, high interest rates and the high level unemployment have been the major deflationary factors at work. They have undoubtedly kept down the public capacity to buy imported goods. Also, it is true that manufacturers have allowed their stocks to run down so that during the third quarter of 1969, for example, they were running down at a rate of about £80 million per annum.
Another factor which has contributed to the happy balance of payments situation has been the fact that world trade over the last year or so has increased at a rate of about 14 per cent. The trade in manufacturers has increased rather more than that figure. In world terms, it is about 17 per cent. What is significant is that, despite this large rate of growth in manufactures and in trade generally, Britain's increase has been


rather less than average, amounting to only 14 per cent. It is certainly less than the growth in trade achieved by our principal economic competitors, mainly West Germany, the United States and Japan.
In a pamphlet published in October, 1966, entitled "Beyond the Freeze", appeals were made by a number of my hon. Friends and myself in the Tribune Group for the use of selective import controls. The Government have turned a deaf ear to those suggestions. The result of the Government's refusal to accept this piece of helpful advice has been that, to avoid our import bill going over the top, it has been necessary to keep the rate of growth of our economy at the modest level we have seen over the last three or four years, that is to say, 2 or 3 per cent., or something of that level.
I should like to urge the Chancellor of the Exchequer, when he comes to present his Budget next month, to look again at his refusal to use a full range of direct import controls. So long as he sets his face against this particular solution as one of a number of steps that could usefully be taken, then our chances of reaching the type of growth which alone will solve this country's economic problem will be greatly diminished.
We must not underestimate the tremendous loss of production as a result of this very low rate of growth, a rate which, under Governments of whatever complexion, has been a feature of our economic life since the war. On the basis of even a modest 5 per cent. assumed growth rate over the years 1966–70, it would be my guess that about £7,000 or £8,000 million of production has been lost. It is easy for the hon. Member for Oswestry (Mr. Biffen) to pooh-pooh this idea, but whatever figure one takes, there has been an enormous loss to the people in production as a result of these continually low growth rates—incidentally, rates which no other advanced Western country seems to find any difficulty in far exceeding.
Another fact to bear in mind is that this kind of low growth rate inevitably means that we shall have the greatest difficulty in shifting this quite offensive level of unemployment which has been with us for a number of years. Two-thirds of a million people unemployed

in this country is certainly an obscenity in the eyes of myself and most of my hon. Friends, and it is not a situation which a Labour Government should have to countenance. This underlines all the more the plea made by my hon. Friends the Members for Salford, West and for Lewisham, West for pressing on vigorously with wage claims in order that this lack in the economy, this under-use of our resources, should be put right by increasing the general body of demand and maintaining expansion.
If we do as I have suggested and go for growth, as the Trades Union Congress recommended, of up to 6 per cent., a number of hon. Members will, no doubt ask how we intend to safeguard our payments position. I should like quickly, so as not to duplicate remarks made by other hon. Members, to outline four or five proposals some of which have been mentioned already in the debate. I have already mentioned the question of selective import controls or possibly quotas in some circumstances. But, in addition, and despite the recent cuts in our overseas military expenditure, the drain on our exchanges for defence expenditure, so-called, is still of the order of £237 million which compares with £258 million in 1968. Also, we could usefully do some heavy cutting in terms of our overseas capital investment, and, in particular, our private overseas portfolio investment. The hon. Member for Weston-super-Mare (Mr. Wiggin) referred to the Australian mining share situation. I must say, as one of the two Australian Members in this House, that it has been a source of no pride to me to see the kind of things which have been going on there.
Another thing I should like to see is the reintroduction of the export rebates scheme which hit the dust at the time of devaluation. But, above all, I should like the Chancellor to try by direct action to control the imports situation and I should like a general moving away from reliance on blind market forces as a means of holding the situation.
I wanted to make several other points. However, in fairness to the hon. Member for Norwood, who has an important Motion to move, I should like to conclude my remarks by again expressing my own gratitude to my hon. Friend the Member for Salford, West for what is


an interesting and extremely worth while initiative which, as I say, I hope will be repeated in the years to come, perhaps in a more formal sense.

3.14 p.m.

Mr. Kenneth Lewis: rose—

Mr. Speaker: Does the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) wish to address the House?

Mr. Lewis: Yes, Mr. Speaker.

Hon. Members: Disgraceful.

Mr. Speaker: I have always believed that it is not a bad thing for hon. Members who wish to take part in a debate to attend a considerable part of that debate. Mr. Lewis.

Mr. Lewis: Mr. Speaker, you must have failed to notice that I sat right through the speech of the hon. Member for Salford, West (Mr. Orme). I did so deliberately because I thought that at a future moment I might want to speak. I sat through part of the speech that followed. I then left. I have been into the Chamber and out again. It is true that I have not been present in the Chamber for most of the debate, but I listened to the whole of the speech of the hon. Gentleman who proposed the Motion.

Mr. Speaker: If what the hon. Gentleman says is true, I withdraw what I said.

Mr. Lewis: I am obliged, Sir.
The only thing missing from the "budget speech" of the hon. Member for Salford, West, in so far as it can be related to the performance of a Chancellor of the Exchequer, is that the hon. Gentleman did not seem to have any liquid with him with which to refresh himself. The hon. Gentleman refused to give way on the only occasion on which he was asked to do so; because he was obviously in the middle of his proposals. This is exactly what the Chancellor does on Budget day.
I noted twelve points from the hon. Gentleman's proposals. The first six seemed to be unexceptionable from the point of view of a future Conservative Chancellor. The hon. Gentleman said that he wanted to reduce Bank Rate

further than it was reduced on Thursday. Other hon. Members have said this, including my hon. Friend the Member for St. Ives (Mr. Nott), who indicated that he thought that a reduction of ½ per cent. was not adequate.
We on this side have always thought that the present Bank Rate is too high and that it has an effect upon ordinary people. House purchase is affected by it. The ability to pay for a mortgage is greatly related to Bank Rate. Young people thinking of buying their houses are inhibited because of the high costs involved in mortgage repayments.
So we would not part company from the hon. Gentleman in his proposal that there should be a further reduction in Bank Rate. The Chancellor may well be keeping something back for his own Budget. It could well be that he hopes that approaching the time of his own Budget he will be able to reduce Bank Rate by a further ½ or 1 per cent.
It has been stressed that we must not improve our balance of payments position so fast at such expense to the ordinary people that we find that for another year or even longer—the lifetime of this Government—we are faced with high mortgage rates. Therefore, a Conservative Chancellor would first make it his duty to reduce Bank Rate to an acceptable level, a rate which would enable building societies to decrease their mortgage charges.
The second proposal of the hon. Member for Salford, West was that private building should be assisted. This is a remarkable suggestion from an hon. Gentleman who is on the extreme Left of the Labour Party and who, with his colleagues, continually claims that it is right that the Government should build more council houses and that fewer houses should be built for sale.
We have always believed that the more houses there are built for sale the less claim there is upon council house lists anyhow, and that in so far as we can build more houses we can ease council lists, because people will purchase their own houses instead of seeking to lay claim to a council house.
We also believe that councils should he encouraged to sell their houses, because the more people who buy council houses the more houses there are available for


councils to let. Furthermore, the more that people are encouraged to buy houses, whether private houses or council houses, clearly the less subsidy is required for houses to let. Everyone knows that council house building is expensive from the point of view of central Government which have to provide a heavy subsidy. That is why we take the view that rents should be more related to the economic position—

Mr. John Fraser: On a point of order, Mr. Deputy Speaker. It is an open secret that the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) has been sent in by his Whips to keep the debate going. My point of order is this. What he is now saying is much more appropriate for the next debate, if he wants to participate, than to a debate on a Budget which is not concerned with the sale of council houses or housing subsidies.

Mr. Deputy Speaker (Mr. Sydney Irving): The hon. Gentleman may speak on this Motion if he wishes. It may be true that what he is saying is appropriate also to the next Motion, but the hon. Gentleman must decide that for himself.

Mr. Lewis: What I am saying is certainly concerned with any Budget proposals from hon. Gentlemen opposite. I am simply going through what was said by the hon. Member for Salford, West. The other day at Question Time the Minister of Housing said that in 1973 there would be about 1 million houses too many in this country.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Reginald Freeson): The hon. Gentleman should not repeat what his hon. Friends are constantly misrepresenting an this score. The Minister stated—as have other colleagues in the Department—that by 1973 we estimate that there will be a crude surplus of dwellings over households, but that in the major conurbations and other districts there will remain major housing problems for many years to come. The hon. Gentleman must not suggest what is wrong, that the Minister has said that there will be too many houses made avail-by 1973. My right hon. Friend never said that, and it should be withdrawn.

Mr. Lewis: The Parliamentary Secretary is much too sensitive because I did not say any of the things he has just uttered from the Box. I simply said that the Minister of Housing—and I am glad that my memory serves me well—said at Question Time that there would be an overstock of houses by 1973 of 1 million.

Mr.Freeson: rose—

Mr. Lewis: In a moment. I recognise that it still means that in some urban areas and in some large conurbations there will be some shortages, and I recognise that in some parts of the country there will surpluses [Interruption.] I shall come to that. The hon. Gentleman did not let me finish.
The point I make is that it is better to build private houses than to overstock in certain areas with council houses, because if people are encouraged to buy their own houses they will buy them in the places they want and this will prevent the kind of situation which the hon. Gentleman has just referred to. Private house-building will then be meaningful in terms of need, and it is, therefore, important that we should encourage private housing. So I agree with the hon. Member for Salford, West on the second point which he made. We agree with him entirely that this would make a very useful part of a Conservative Budget.
Again, the hon. Gentleman spoke of mortgages and said that people should be encouraged to take out mortgages through their local authorities. We agree with that. We have always encouraged Conservative councils to provide mortgages for people who wanted them.
Then the hon. Member for Salford, West spoke of hire-purchase rates and the phasing of hire-purchase payments. This has been referred to on several occasions by hon. Hembers on this side of the House. We have said that the motor car industry is in a difficult situation which could get worse because of the way in which the hire-purchase system has been arranged by the Chancellor. That also could be looked at in the Budget. It is the sort of weapon which any Chancellor has; he can from time to time switch the way in which hire purchases are arranged so that there is a larger or smaller demand on the motor car or television and radio industries,


and in that way he can regulate the consumer economy. The hon. Gentleman said that he did not wish to create a consumer boom, and I shall come to that, but he recognises, I am sure, that the question of hire-purchase rates and the phasing of payments has some effect upon consumer purchasing.
Next, the hon. Gentleman proposed that the Chancellor should look at school building. The Government have an atrocious school building record. In my constituency several schools have been subject to rephasing, so that, for example, a school which was to be started in 1967 was put off until 1968 or 1969, and so on. People who have been waiting for 10 years or more for a new school now have to wait a further two or three years.
The problem is of particular significance in the primary sector. In our view, primary education, the basic education, should have far more money spent on it than is being spent on, for instance, higher education; yet some of our worst schools are primary schools. Again, therefore, I go along with the hon. Gentleman in urging the Chancellor to look at that. Such a proposal would find a response in the hearts of both teachers and parents. In so far as it is related to comprehensive education, if one had to make a choice between putting more money into primary schools than into comprehensive reorganisation—which is about to come under scrutiny in the Standing Committee on the Education Bill—the emphasis should go on primary schools.
One may wonder how the Chancellor will get out of the dilemma into which he has been put by so many of his hon. Friends. It is a dilemma of priorities. If comprehensive education is to be forced through, if it is to be based upon schools specially created for the purpose rather than on schools which may be miles apart, if the school leaving age is to be raised in 1972, and if there is to be much-needed improvement in primary schooling, where will the money come from?
Any Chancellor must concern himself with priorities, and he has to impose priorities upon his colleagues. The trouble with this Government is that the various Ministers either will not have

priorities imposed upon them, or when they seek to arrange their own, they get the priorities wrong. It is our view that on comprehensive education the Government have the priority wrong, and only the Chancellor can put it right. Whatever happens to the comprehensive education provisions in the Education Bill as it passes through the House, if the Chancellor does not make the money available the Bill will become a non-starter.
The hon. Member for Salford, West then came on to the question of direct or indirect taxation and made a passing comment on the defence budget and the cost to the country of the Conservative proposals on defence. He said that they would put up the cost of living, or would mean that we could not cut income tax and might even have to put it up. But we are talking about £300 million at the most, although I know that some of my hon. Friends have said that the proposals will not cost that amount. I do not care if that is the cost, because £300 million is a very small amount to pay to get our defences right. It is a small percentage of defence spending and is minute compared with the Chancellor's Budget as a whole. Since we have recently given the teachers £120 million—and I do not complain about that—the sum of £300 million which is supposed to be such a large plus on the defence budget is completely acceptable.

Mr. Albert Booth: As the hon. Gentleman has said that the Government have not got their priorities right and that our school programme is not sufficient, will he show that he has his priorities right by saying where he would rather have the £300 million spent—on comprehensive schools or the Opposition's defence projects?

Mr. Lewis: That is no choice. It could be a choice that we have no defence at all, that we do away with the lot. I do not know whether the hon. Gentleman would wish to make that choice. Would he say that everything spent on defence should be transferred to welfare, education and all the social activities in which the Government are involved? If we are to have a defence force it must be viable, able to do the job the Foreign Secretary wants it to do. It must enable this country to play its part in its alliances.
The truth is that £300 million is very small in terms of the national finances. If we are to have improved defence forces and be able to meet our commitments so that we can look our allies in the face, it is worth spending that £300 million. But, of course, we have made it clear that that would not be the cost. That was the dispute between this side of the House and the Secretary of State for Defence last night.
However, the hon. Member for Salford, West was talking about direct or indirect taxation and mentioned defence only in passing. We believe that income tax is too high and is a disincentive. As wage rates rise and more and more people come into the top rates of income tax it becomes even more of a problem. The hon. Gentleman suggested that a large number of people at the bottom of the ladder should be removed from liability to income tax. I do not oppose that, but if it happens it will be because the Chancellor is getting more money from those on the middle rungs of the ladder, because as wages go up a great amount, and the Government encourage them to do so, a third or more of the increase is clawed back by the Chancellor. Therefore, he will have a bigger surplus next year than he had this year, and he has a Budget surplus of £800 million or perhaps £1,000 million this year. As wages and salaries increase, more and more of the middle range of taxpayers are having to pay more and more into the coffers of the Exchequer.
We think that, with the increases in wages and salaries taking place, people can afford to pay more. Not only can they afford to pay more but they would want to pay more provided they had more in their pockets at the weekend. Let us take it to the most ridiculous. Let us assume that a man pays so much tax that when he goes home at the end of the week he has only enough left to pay the rent, pay for some petrol for the car and the car insurance and give his wife enough for the minimum of housekeeping. This means that there is no fun left in life. It is no good the man and wife going to the shops because they have nothing to spend. They can window-shop and that is as far as their pleasure will take them. If, on the other hand, the Chancellor of the Exchequer gives back to the wage and salary earners

more of their own money, they can go to the High Street and spend their money in the shops even if, in so doing, they are paying more in tax to the Government for the pleasure of doing so.
If we had the choice, therefore, between tax on incomes being reduced and taxes on goods and services going up, we would rather have the latter instead of trying to maintain the crushing burden of taxation on incomes—a burden which becomes worse as people move into higher wages and salaries.
On the first six points which the hon. Member proposed to the House when he opened his Budget today, I do not think we would have much to quarrel with. But then he came to the meat of the matter. He came to the Socialist elements in it—more Socialist, of course, than any Budgets we have had so far, although not more inflicting. We have had six Budgets from the Government, and if the Chancellor thinks that one reasonable or even good Budget will put the people into a good mood after their sufferings over the last five years, he is greatly mistaken. Whatever taxes the Chancellor may remove will only be a reduction of the additional £3,000 million imposed in the last few years, and I cannot see how he would be able to reduce taxation by even one-third of that amount.

Mr. Marcus Lipton: On a point of order, Mr. Deputy-Speaker. Would it not be for the convenience of the House if the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis) gave some indication of how much longer he is going to speak?

Mr. Deputy Speaker: Perhaps the hon. Member for Rutland and Stamford will remember that other hon. Members are waiting to speak.

Mr. Lewis: I found myself extremely interested in what was said by the hon. Member for Salford, West and I am plying through my notes as speedily as I can. It is important that some of the points he put should be answered.
Then the hon. Member came to the most Socialist part of his Budget, and the first thing he dealt with was private wealth. Private wealth always frightens hon. Members opposite. Anyone with private wealth is a whipping stool for them, but there has been in the past twenty


years a tremendous equalisation of wealth, and hon. Members opposite know that it happened under the Conservative Government as well as under the Labour Government.
When we talk about shares and dividends, we must remember that even the trade unions have a unit trust nowadays. It has not done as well as many of the other unit trusts, perhaps because the trade unions are not very good at involving themselves in capitalist activities. But any newspaper, including the Sun and the Daily Mirror, publishes the buying and selling prices of unit trusts.
Unit trusts are comprised of the investments of large numbers of people throughout the country. The trusts put money into businesses which need investment. In so far as the ordinary people save through unit trusts, they are assisting the very thing the hon. Member for Salford, West says he wants to assist—more investment in industry. This is where investment in industry comes from.
The amount received in dividends on unit trusts and even on some of the best equity shares as a return on purchase is not as great as the return on gilt-edged securities. I have not heard any hon. Member opposite, not even on the Left wing of the Labour Party, suggest that we can do away with gilt-edged stocks. Indeed, the more one nationalises, the more gilt-edged stock one needs. Today there is more profit in investing in some gilt-edged stock than there is in investing in some free enterprise concerns, or even some unit trusts.
Hon. Members opposite talk a load of nonsense about profits. Profit is the means by which industry, whether nationalised or free enterprise, gets its investment, secures sufficient to plough back and expand. Unless we have expansion, unless we have profitability, we cannot compete, and if we go into Europe, we shall have to compete or be simply submerged.
Private wealth, is so far as it exists nowadays, is sufficiently reasonably spread to justify Labour Members ceasing to call it names whenever they come to an election. If there were a wealth tax on top of all the others, more and more people would put their money out of the country instead of in the country.

We want to increase wealth. That is the difference between Conservative proposals and the proposals of hon. Members opposite, or even those which the right hon. Gentleman will make in his Budget.
The only difference between hon. Members below the Gangway opposite and the Chancellor of the Exchequer is that he is a little slower in getting to where they want to go. The longer we have a Socialist Government, the quicker we shall get to the extreme Left position of the hon. Member for Salford, West.
The hon. Member suggested that family allowances should be increased. Whether the aim of increasing family allowances is to increase population does not alter the fact that if family allowances were increased, the population would be increased. With all the pressures for an intake of Commonwealth immigrants, with projected increases in the birthrate, I cannot think that we will be justified in spending £120 million, and I do not think it would be popular in the country. Instead, we could give a little more to old-age pensioners or increase the amount of money spent on services for the young.
It has said that the charity status of the public school should be removed. The party opposite have been following a policy of slow strangulation of the public school for 10 years or more, but they have never done it completely because they know that every penny spent in private education means that more money is available for public education. People who are prepared to spend money after taxation on educating their children make no claim upon the State and that must be of some benefit to the country. I am in favour of increasing the direct grant school list—

Mr. Speaker: Order. The hon. Gentleman must not widen the debate. This is a debate about economics and finance, and he must relate his remarks to financial proposals about public schools.

Mr. Lewis: I raised it because the hon. Member for Salford, West mentioned the point. Not all public schools are charities, but most are. I am not certain whether it could be done,


although I do not believe that it should be done. It would affect the whole question of a person's right to make convenants to charity. If the Government sought to do this they would need to acknowledge that they would have to find a large sum of money from the Exchequer, not only for schools but for many charities which could not exist without this status and without the benefits of covenants, and so on.
The hon. Member said that his proposals would cost about £1,000 million. That is rather more than the Chancellor has available as a surplus this year, and it is not the kind of sum that he is likely to have available for distribution otherwise he would have the exaggerated consumer boom which the hon. Member said he wanted to avoid. If £1,000 million were put into the economy in addition to all the wage and salary increases which have been given, there would be the biggest consumer boom that we have ever had.
Therefore, the hon. Member for Salford, West will have to do with a little less from the Chancellor when he presents his Budget. But I have no doubt that this time the right hon. Gentleman will seek to give just enough away to encourage people to vote for the Labour Party at the next election. It will be of no avail. I do not think that this country wants any more Socialist Budgets; it has had enough of them. The people want encouragement from top to bottom. They want a Budget which will encourage those with wealth to invest it and use it for the benefit of the nation; and if meantime they get some advantage from it, why should we worry about that? If we distributed all the wealth which exists among the people who own more than £100,000 of assets, it would not give us more than a few shillings each, and we should simply kill the goose that lays the golden egg.
The people want encouragement at the managerial and executive level. They want lower rates of penal taxation among those who are earning reasonably good incomes but do not have large capital sums. It has been more and more difficult to build up capital in recent years. They want encouragement among people who are employed in offices and factories. They want to feel that their money, when they earn it, will not be eroded month

by month. The only way in which we shall stop exaggerated wage claims is by stopping inflation.
It is a vicious circle and a disease. People see prices escalating and so they say, "We need more money to keep pace with increasing prices." Wages increase, which, in turn, causes another increase in the price level. So it goes on and on. It has been going on for practically the last six years while right hon. and hon. Members opposite have been involved in running the country. People want a change, and they will get a change. When we take office we shall embark on a demolition exercise of the restrictive policies of which we are totally and absolutely tired.
I congratulate the hon. Member for Salford, West on introducing the Motion. It has given us some ammunition for the future. Sadly, I hope that this will be the last time that he will have the chance to comment from that side of the House on a Socialist Budget.

3.54 p.m.

Mr. John Fraser: I shall not follow the rambling, boring and mainly irrelevant remarks of the hon. Member for Rutland and Stamford (Mr. Kenneth Lewis). We know that the reason for his contribution to the debate is that he and his hon. Friends are ashamed to discuss the next Motion. It is for exactly the same reason that the hon. Member for Wimbledon (Sir C. Black) is scribbling there, with the encouragement of the sniggers of the hon. Member for Richmond, Surrey (Mr. A. Royle).
The hon. Member for Wimbledon knows that he must try to prevent the housing of his own area from being debated on the next Motion. He knows that in Merton no houses were put out to tender by the Conservative council during the first nine months of 1969.

Mr. Speaker: Order. The hon. Gentleman must resist the temptation to discuss the Motion which he is not allowed at this moment to discuss.

Mr. Fraser: The hon. Member knows, also, that none have been started. There is relevance to the Budget debate, because my hon. Friend the Member for Salford, West (Mr. Orme) woke about expansion of the economy bringing growth through increasing housing programmes.


He was absolutely right. I do not accept the dreary argument that one should defeat wage claims by deflation, as the hon. Member for Rutland and Stamford suggested. [Interruption.] The hon. Member was so mindless about his remarks that he cannot even remember what he said.

Mr. Kenneth Lewis: Mr. Kenneth Lewis rose—

Mr. Speaker: Order. I suspect that the hon. Member for Norwood (Mr. John Fraser) is not giving way.

Mr. Fraser: I distinctly heard the hon. Member for Rutland and Stamford say that the only way to combat massive wage claims was by stopping inflation. I am sorry, perhaps I am an idiot—I was certainly an idiot to sit listening to the hon. Member's remarks—but, surely, the converse of stopping inflation is deflation. I much prefer the remedy put forward by my hon. Friend the Member for Salford, West that the way to deal with growth is partly by means of housing.
As my hon. Friend rightly observed, the import input in housing is 10 per cent. The import input of consumer goods is 20 per cent. That is why I would not like to see an operation in London which had terrific consumer spending power and which made tremendous amounts of money available to pass to the public to pay for things like imported cars, radios and other goods. I would much rather see as a form of Budget strategy a development of resources in housing, which, in turn, would mean less demand on consumer goods that were likely to cause a strain on the balance of payments.

Mr. Kenneth Lewis: How would it be less?

Mr. Fraser: Because it would involve a shift of resources away from consumer goods and towards much-needed social development.
A Socialist Budget is a Budget which is just. It is not concerned solely with the rearrangement of fiscal matters or the management of the economy. It involves justice and compassion and it involves care for the people whom the Government represent. That is why, in the form of the Budget which my right hon. Friend the Chancellor will introduce, I want him to provide those measures fiscally which will deal with recalcitrant, heartless, uncompassionate, awful local authorities in the London area which have tried to sabotage the Government's strategy of devoting resources to social purposes—things like housing—and to steer them away from the less necessary things that are the interest of hon. Members opposite, things like bingo halls, betting shops and that kind of expenditure.
Therefore, although there is not the time now, I hope on another occasion to develop this argument and to place it on record that hon. Members opposite must have a great deal of which to be ashamed in London in not being prepared to have this matter debated.

Question put and agreed to.

Resolved,
That this House approves the general economic strategy outlined in successive economic reviews of the Trades Union Congress and upheld at the 1969 Labour Party conference at Brighton; and considers that these measures should now be incorporated in a Socialist Budget.

HOUSING, LONDON

3.59 p.m.

Mr. John Fraser: I beg to move,
That this House recognises the great housing needs of London and welcomes the policies of the Government designed to encourage the construction of new houses by local authorities and others, to increase housing subsidies, to improve old houses to control multiple occupation and eradicate slums, to establish reasonable rents and security of tenure and end the leasehold system, to provide out-county housing and new towns, to assist house purchase and generally to improve housing in London; condemns the Conservative Greater London Council and other Conservative councils who with the encouragement of the Conservative Party leadership, which is committed to reducing housing subsidies, have curtailed or stopped new building; and calls on the Government to take every initiative to make sure that London is provided with the new and modernised homes it needs.
I do not think that there is any Member of Parliament in London politics who has not been struck by the fact that this problem is the largest and one of the most intractable to deal with. The way in which it affects the population cannot be measured solely in terms of numbers. For instance, in London the most optimistic estimate of housing demand is that of the South-East Economic Council, which estimated a need in London of 200,000 houses.
If we look at the list of people waiting—

It being Four o'clock, Mr. SPEAKER interrupted the proceedings.

Orders of the Day — AMUSEMENT ARCADES (REGULATIONS) BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — COPYRIGHT BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — STAMP BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — LABELLING OF FOOD AND TOILET PREPARATIONS BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — ANTI-DISCRIMINATION BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — EQUAL PAY BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — PERIODICAL PUBLICATIONS (PROTECTION OF SUBSCRIBERS) BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — REPRESENTATION OF THE PEOPLE BILL

Order read for resuming adjourned debate on Second Reading [6th February].

Hon. Members: Object.

Debate further adjourned till Friday next.

Orders of the Day — INFANTICIDE BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — TRADE DISPUTES BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — DEER HUNTING AND HARE.COURSING ABOLITION ACT

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — SUNDAY ENTERTAINMENTS BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — GENERAL RATE ACT 1967 (AMENDMENT) BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — LOCAL GOVERNMENT (FOOTPATHS AND OPEN SPACES) (SCOTLAND) BILL

Order for consideration (not amended in the Standing Committee) read.

Hon. Members: Object.

Consideration deferred till Friday next.

Orders of the Day — CHILDREN AND YOUNG PERSONS ACT 1963 (AMENDMENT) BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — HISTORIC WRECKS BILL

Order for Second Reading read.

Hon. Members: Object.

Second Reading deferred till Friday next.

Orders of the Day — AIRCRAFT NOISE (RINGWAY AIRPORT)

Motion made, and Question proposed, That this House do now Adjourn.—[Mr. Hamling.]

4.2 p.m.

Dr. M. P. Winstanley: I am most grateful for this opportunity to raise on the Motion for the Adjournment the problem of aircraft noise within the vicinity of Manchester Airport at Ringway, and I am grateful, too, to the Minister of State for being here to reply to the debate—I know, at some personal cost to him, and, I happen to know also, at some cost to his constituents. I am grateful to him.
As you, Mr. Speaker, have often found it necessary to remind us, we live in a very noisy world.

Mr. Speaker: Order. Very rarely do I have to remind the House about this.

Dr. Winstanley: But occasionally you have reminded us, Mr. Speaker, that we live in a noisy world. I know very little of space exploration, and I do not know whether anybody lives on any other world, but I do know that if anybody is living there he will know that we are living here: he is bound to have heard us!
Of course, aircraft noise is only one aspect of the total problem of noise. There is traffic noise; there is industrial noise. It would be a mistake to blame all the problem of noise on aircraft,


but aircraft noise is what we are here this afternoon to discuss.
This subject typifies, I think, the kind of conflict which politics faces in modern developing society, the conflict between competing interests—in this case, the conflict between the need for rapid and cheap travel, and the need for peace and quiet. This conflict has somehow or another to be resolved to the mutual satisfaction of both sets of interests. It is not a matter of one side winning and the other losing; both sides have to win, because we have to find a way of drawing an acceptable line between the two positions. Society has to find a way of resolving many conflicts of this kind, with atmospheric pollution, planning, and so on, but they are typified by the aircraft noise problem.
Such conflicts may sometimes exist within the same individual. I have kept the correspondence of a constituent living near Manchester Airport who complained about the noise. His wife was made ill; his children were in danger of failing their O levels because they could not get on with their homework; he could not get on with his work and had to stay late in the office to deal with his papers. The same constituent wrote to me some weeks later from his business address complaining about the inadequacy of flight schedules to Düsseldorf and how his export business was being held up. This is an example of the conflict that can arise within an individual.
Those who seek to control and reduce aircraft noise do not seek to abolish air transport or aeroplanes; they merely seek an acceptable compromise.
People's degree of tolerance towards noise varies enormously. There are people who are not disturbed by noise and others who are easily disturbed by it. This was revealed in the Wilson Report some years ago, and has been confirmed many times. I have confirmed it myself. In calling at houses in my constituency, I have asked at one house whether the occupations were troubled by noise, and I have been told that they are desperately troubled, they have been made ill, they are wondering whether to move. When I have asked at the house next door what the occupants felt about the noise, the reply was been "What noise?". There is a great variation in people's noise thresholds.

Nevertheless, we must accept that noise in general, and aircraft noise in particular, can be a nuisance almost to the degree of becoming intolerable to certain individuals.
We have not had a discussion in the House for some years on the subject of the noise in the neighbourhood of municipal airports. People who live close to municipal airports are, possibly, at a disadvantage compared with those who live close to airports which are controlled by the British Airports Authority. For example, I understand they cannot at the moment qualify for soundproofing grants. It may be that municipal airports are not controlled by the rules and regulations which the Minister has power to make.
I recall in an earlier discussion in the House on the feelings of the public about municipally-owned airports the comment of the Minister of State's predecessor that in the case of municipally-owned airports local democratic pressures apply. I remind the Minister that this municipally-owned airport is not situated within the municipality; it is owned by the Manchester City but is in Cheshire, and the land immediately abutting the airport is mainly in the Urban District of Cheadle and Gatley and in Wilmslow. Local citizens cannot, therefore, apply democratic pressure to their councillors. Their councillors are not the councillors who are concerned with the control of the airport and have no vote within the Manchester area.
This controversy has a long history. The area is a good residential one, and the residents are the sort of people who take notice of the environment. They are interested in the amenities and the quality of life, and they respond rapidly to stimuli of this kind. Much of the campaign has been led by the Heald Green and Long Lane Ratepayers Association. I pay tribute to that organisation for its enthusiasm, its activity, its energy and its degree of responsibility. It has campaigned not in an entirely negative way but positively.
A great deal of help has been obtained from two newspapers in the area, The Guardian and the Manchester Evening News. They have done a great service to the local public by bringing this controversy into the open, not by taking one side or the other, but by


looking at the controversial matters which are causing difficulty.
By allowing these matters to be argued publicly many of the anxieties have been relieved. Doubt and uncertainty are a potent cause of worry and anxiety. Some of this has been removed by the kind of newspaper coverage given to this matter by the Evening News and The Guardian, the most recent being an excellent article by John Evans appearing in the Manchester Evening News this week which argues for soundproofing grants now.
Two reports recently produced by Mr. Kenneth Williams, the Chief Public Health Inspector for the Urban District of Cheadle and Gatley, have had great effect since they give a careful and balanced survey of the situation.
In one report published in October, 1969, Mr. Williams says on page 9:
Aircraft noise in the district is a serious environmental health problem and is increasing.
The report, which I know the Minister has seen, states that many jets taking off from Ringway are exceeding the noise limits laid down at Heathrow. Detailed information was published in the report. Measurements were taken showing that 34 per cent. of aircraft taking off exceed the Heathrow rate limit of 110 perceived noise decibels, and that 21·5 per cent. of aircraft exceed this limit on landing.
The second of these reports published in February, 1970, goes into further detail. It applies noise contour maps from Gatwick, another one-runway airport to the Manchester Airport area, and makes certain deductions therefrom. The report urges a strong case for soundproofing. Section 6 of the second report says this:
The airport authority is to allow 2,750 aircraft movements during the seven summer months from April to October, 1970 between the hours of 11.30 p.m. and 6 a.m.
Section 7 says
It is probable that residents at Heald Green
which the Minister knows is part of the Cheadle and Gatley U.D.C.
will suffer greater nuisance from noise at night during the coming summer months than any of the communities around the two London airports.

If that is correct, then it is a serious matter.
It raises the question of soundproofing grants. If they are available for householders living close to Heathrow they should equally be available to other citizens who are similarly troubled, citizens who, as the report shows, are possibly troubled even more.
The most recent event to which I would draw the Minister's attention is a meeting that was held in my constituency on 14th January under the auspices of the Heald Green and Long Lane Ratepayers Association, at which more than 100,000 local citizens were represented by ratepayers' and residents' associations. They came to a number of conclusions and published an interesting and highly responsible report, a copy of which I have sent to the Minister. I hope that he will confirm that what they are asking for is reasonable.
Obviously, all that they are asking for cannot necessarily be given now, but I hope that we shall hear in the Minister's reply something about the possibilities of their getting what they are after. I do not suggest that nothing is being done. I am aware of the action taken by the Board of Trade. The document "Action against aircraft noise", published by the Board of Trade, has done a great deal of good in spreading information and has gone some way to dispel the doubts and uncertainties about whether anything is happening which has been one of the factors aggravating the whole situation.
I turn now to what I see as the kinds of remedy that are sought. In the long term we must plan for the siting of major international airports on estuaries so that as far as possible flying is not over residential property. That is in the long term, and there is no immediate advantage from it. I do not suggest that we should close down airports such as Ringway, but I suggest that the major expansion could be at an airport on an estuary with overland links between other airports.
The second—this is the thing from which we shall get the most advantage—is further research into quieter aircraft engines. I am interested in what I have heard about the noise certification


scheme. This is encouraging. I believe that the Government hope to introduce the scheme shortly. I should like to know in what period of years any benefit will flow from it to those now suffering from aircraft noise. Those are the long-term solutions.
As to short-term solutions, what noise abatement procedures are in force at present at Manchester Airport? Are they being effectively monitored? If so, are these noise abatement procedures being observed, and are they effective?
Next, what is the present situation with regard to soundproofing grants? It is possible that this will require legislation. That may have to be initiated by Manchester Corporation. What is the Government's attitude towards it. If they accept the figures which have been put forward by Mr. Williams and which are backed up, they must agree that it is only just that the people in the area of Manchester living close to the airport should have the same rights as other people who live close to other airports.
Next—this is very important to us all—there is the question of night flights and night schedules. I take the view that people will, in general, tolerate a considerable amount of noise during the day. Once night flying becomes extensive, once there are many flights through the night. I believe that people will begin to object and that the amenities of the district will be considerably disturbed.
What plans does the Minister have for trying to get control over the number of night flights? I appreciate that a plane which leaves one place has to settle at another time in another place. An aeroplane cannot be kept suspended in the air during the night: it must land somewhere. I fully understand that to do anything about night schedules there must be an integrated scheme between a whole number of airports—the point of exit, the point of entry, and so on. This would need co-ordination, presumably at Ministerial level. What steps are being taken?
Next, perhaps the Minister will say something about his ideas on the consultative committee which has been set up. I am glad that this committee has been established. I believe that it holds out great hope now that it has on it representatives of all those from the area,

because they feel that at last they can put their problem to the airport authority.
I have no criticisms to make of the consultative committee. I would merely express one reservation. I do not want to be misunderstood. I have a high regard and great respect for Mr. Boynton, a local authority official of great distinction and ability. However, it is, perhaps, a little unfortunate that he was appointed secretary of this body, as he lives in Chester—30 miles from the Manchester Airport—and as he is closely identified with one of the parties concerned.
It might have been better from the public relations point of view, as the secretary has a large part to play in the machinery, if he had been somebody a little more independent and somebody sharing in the problem. I repeat that I do not want to be taken to be criticising Mr. Boynton. That is the last thing I would wish to do. I am sure that he is doing excellent work.
I want the committee to function effectively. What powers, if any, will the consultative committe have? Will it have the power to demand that it should be informed about new developments as to night flights?
The next and last thing that I want the Minister to tell us is his ideas for the future. It might be helpful to have the two airports in our area—Manchester Airport and Liverpool Airport—Spekeunder some integrated control so that we could then operate them as an airport complex for the whole area of the North-West, with rapid overland travel between the two. This would allow for a flexibility which could reduce the nuisance from which we suffer. Perhaps we could then have more night flights going from Liverpool rather than from Manchester.
I am aware that the business of where an airport is placed is rather like a game of musical parcels: nobody wants to be landed with it when the music stops. When the House discussed the question of Stansted and the Third London Airport, the only voice that was raised in favour of keeping the airport at Stansted was that of the hon. Member for Faversham (Mr. Boston), who knew that if it was not at Stansted it was likely to go to his parish.
I am not saying merely that all the aircraft now flying from Manchester should in future fly from Speke. I am


saying that some kind of integrated arrangement as between the two might in the end be helpful to both.
I am grateful to the Minister for being here. I look forward to hearing what he has to say. I am sure that people in my area are desperately concerned about this problem. I am equally sure that they understand the difficulties and are prepared to accept that there are difficulties. They will accept a compromise solution which meets the desires of both sides. They will approach the whole matter with responsibility provided that they understand that something is being done.

4.20 p.m.

The Minister of State, Board of Trade (Mr. Goronwy Roberts): First, I congratulate the hon. Member for Cheadle (Dr. Winstanley) on his choice of subject for this debate and on his balanced and constructive presentation. I was particularly interested to hear from him the account of the meeting on aircraft noise which he attended during the Christmas Recess, and to hear today the main points of concern to people living in the vicinity of the airport. My hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) has on many occasions in the past made clear to me the concern about the effect of noise disturbance from Manchester Airport upon his constituents.
The points raised by the hon. Member are particularly worth serious consideration because, like the hon. Member himself, many of his constituents approach this problem in a responsible and, as he said, positive manner. Their voices are not the voices of people determined to obtain alleviation from aircraft noise at no matter what cost to the aviation industry, which brings great benefits to the country as a whole and which, through Manchester Airport, contributes greatly to the economy of the North-West. They wish to see a further expansion of the airport in order to share in the rising prosperity of the country, but they do not wish this expansion to come about by causing undue disturbance to people living nearby. This is an attitude that I understand and with which I sympathise.
I fully share the concern about the growing problem of aircraft noise. Since

I have been in my present office, I have been made deeply aware, not least by the hon. Member, of the extent of the problem, and I am determined to do all I can to contain it and to commence steps which will bring about a real reduction in the disturbance suffered by people near major airports such as Manchester.
I must say that a complete solution is not in sight, and I would be misleading the House if I did not make this clear. It must be a long-term process, as the hon. Member indicated. With the inevitable and, indeed, desirable growth of civil aviation, the position is unlikely to improve generally for some years. I believe we now have the means to effect this eventual improvement, and I shall refer to this later, and to one or two points cogently made by the hon. Gentleman.
In the meantime I should like to concentrate upon the particular immediate problems of Manchester Airport. I know that there is a feeling locally that the Manchester Airport authorities have not been active enough in protecting the amenity of people living near the airport, and this has led to demands that the Board of Trade should impose noise abatement measures at Manchester as we do at Heathrow and Gatwick. I think it is well known now that we have not the same legal powers to impose noise abatement measures at municipal airports as we have at British Airport Authority airports. It must, therefore, be for the local airport authorities to devise measures to protect the public, although the Board of Trade is always available to give advice to these authorities.
I think it is right that there should be this devolution of authority. It is only local people who know the full extent of the local problem and who are also aware, through their many contacts, of the economic needs which their airport meets locally. The local airport authority is, therefore, in a far better position than are we, sitting far removed in Whitehall, to strike the right balance between local economic needs and local amenity.
Whatever criticisms may have been made in the past, I know that Manchester Corporation is now well apprised of the need to take active steps to protect the local population to the fullest


extent practicable. It has devised some draft noise abatement measures which are currently under discussion with my Department, whose advice Manchester has sought. When finally agreed, these measures will be published by the Board of Trade as a "NOTAM" issued on behalf of the Manchester airport authority, and thereafter included in the United Kingdom Air Pilot for all airlines and pilots to see. The Manchester authorities hope eventually to supplement these first measures by additional ones such as minimum noise routes and monitored take-off noise limits for jets. My officials are already discussing the ways in which minimum noise routes could be made compatible with air traffic control requirements. All this is at present under study, and it is too early to say to what extent such measures will be appropriate, but I know that the hon. Gentleman will be glad to hear that work is in hand between my Department and the Corporation.
I think that these facts establish that Manchester Corporation is alive to its responsibilities as a "good neighbour". I was glad that the hon. Gentleman made the point that there must be co-operation with adjacent authorities, even though the airport may not straddle the boundary between authority areas which are equally affected. In addition, as Manchester is an airport designated under Section 8 of the Civil Aviation Act, 1968, the airport authority has now set up a consultative committee on which sit representatives of all areas surrounding the airport. All matters affecting the interests of people living in the neighbourhood of the airport can be discussed on this committee, and I hope that it will prove effective in bringing direct to the airport authorities first-hand information of the worries and anxieties of people affected by noise disturbance. As the committee has been in existence for only a few months, it is too early to expect really effective action yet; past experience has shown us that it may take some time for consultative committees to settle down and play their fully effective part.
There are two other points I should like to mention. First is the soundproofing of houses. As hon. Members know, we have instituted a soundproofing grants scheme at Heathrow, administered and paid for by the British Airports

Authority. This scheme followed recommendations by the Wilson Committee in 1963, which stressed the need for special measures to meet the special needs of Heathrow airport. Only a very small percentage of householders eligible applied for a grant under this scheme. We are rather surprised to have found this poor response, but it seems that soundproofing does not provide a complete answer. We have, in any case, no powers to introduce such a scheme at Manchester or similar areas. The possibility of such a scheme there, together with its likely extent and efficacy, is, however, the sort of thing which might well be discussed by the consultative committee.
The other point I should make is the question of night jet flights. Clearly, disturbance at night time, causing broken sleep, is more serious than the already serious daytime problem. It is also an unfortunate fact that the peak period for night traffic is during the summer holiday season when people tend to want their windows open and the noise from jet aircraft passing overhead is even more noticeable.
On the other side of the coin, airports and airlines exist to serve the travelling public, and there is, clearly, a rapidly increasing demand for package holiday tours, which to a large extent, are responsible for the number of night jet flights in the summer. I do not deplore the fact that increasing numbers of people in this country now find it possible to go abroad for their holidays. I am concerned, however, lest this traffic should seriously inconvenience people on the ground.
I am also aware that an individual airport authority on its own may feel inhibited from imposing night restrictions, as a limitation in one place would deter users of the airport and probably result in the growth of traffic shifting elsewhere. I know that Manchester has announced a limitation on the number of night jet flights for this summer. This is a welcome move; but because I want to see the problem tackled in a co-operative spirit throughout the country I wrote to the Aerodrome Owners Association and the Joint Airports Committee of Local Authorities to ask whether their members could consult among themselves with the object of co-ordinating their efforts in finding a fair and equitable solution to this problem. I sincerely hope that a


constructive solution will emerge from these consultations.
I should like to mention some of the more general aspects of the aircraft noise problem. The points we have been discussing and are discussing as a Department with the corporation cover measures designed to contain an already serious problem and to reduce to a minimum disturbance which must necessarily be considerable in the close vicinity of major airports until such time as aircraft can themselves be made quieter.
There is a limit to what can be done, in our crowded island, to keep the aircraft away from the people. The real attack on the problem in the longer term must be to achieve a reduction of noise at source. The Government are now spending more than £1 million annually on research in this field, and some extremely promising results have already been produced. It is now possible, as a result of this research, and of similar research in other countries, to produce aircraft that are roughly half

as noisy as aircraft of equivalent weights now flying.
To ensure that the results of this research are applied in practice, we took powers in the Civil Aviation Act, 1968, to require aircraft to meet noise standards—what is known as aircraft noise certification. My right hon. Friend intends, within the next few weeks, to lay the first Order in Council under these powers to make it obligatory for future types of subsonic jet aircraft to carry a certificate showing that they have been able to comply with specified noise standards. This will apply to aircraft of all nationalities landing or taking off in this country. The United Kingdom is an aviation cross-roads—

The Question having been proposed after Four o'clock and the debate having been continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-eight minutes to Five o'clock.